Hensoldt Aktie

Ladies and gentlemen, welcome to the HENSOLDT AG H1 Results 2026 Analyst Conference Call. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast.

At this time, it's my pleasure to hand over to Nicole Schillinger, Head of Investor Relations. Please go ahead.

Good afternoon, and welcome, everyone. Thank you for joining us for our H1 2026 earnings call. My name is Nicole Schillinger, and I took over as Head of Investor Relations on the 1st of July. I'm delighted to have joined such a strong IR team, and I'm very pleased to be hosting my first earnings call with you.

Joining me on the call are our CEO, Oliver Dorre; and our CFO, Christian Ladurner. They will take you through today's presentation and provide an update on our business performance, strategic priorities and financial development. We will then move into the Q&A session at the end of the call.

With that, I hand over to you, Oliver.

Thank you very much, Nicole, and a warm welcome to all of our investors and analysts. It's a real pleasure to have you with us today. There are moments when geopolitical decisions translate directly into industrial reality. The NATO Summit in Ankara was one of them. The 5 themes on this slide map on to our business. So let me take them in turn.

First, the financial commitments. They confirm a multiyear investment cycle across all our core markets and give us a long-term demand visibility that supports the capacity investments we are already making. Second, the Drone Edge initiative formalizes counter-UAS as an alliance priority. That creates additional momentum for capabilities that already in our portfolio. Third, NATO's technological focus on sensors. Radar & Electromagnetic Warfare aligns closely with our core technologies as these become alliance priorities, procurement programs tend to follow.

Fourth, digitalization, cloud and AI. The future battlefield is networked, data-centric and software enabled, whoever sees first and decides faster, prevails. That is sensors plus software, and it is exactly where HENSOLDT is positioned. And fifth, Ukraine support creates a durable service and upgrade pipeline for systems already in operation. Ukraine is today the largest operator of our TRML-4D radar worldwide. That is a strong validation of our positioning and the foundation for long-term support business. Ankara, to sum it up, did not change the direction of travel. It confirmed and accelerated.

The previous slide shows the political trend. This one shows now how our portfolio maps on to the defense architecture that is now emerging. MDOcore is our software backbone for the digitization of defense. It connects sensors, platforms and detectors with an open software architecture, which is what multi-domain operations require. Platforms matter still, but increasingly, the network decides.

In missile defense, our position becomes tangible with FREYJA. Together with Fire Point, we are combining combat-proven Ukrainian technologies with our radar expertise. The Ukraine connection is deliberate. We are integrating proven capabilities and with them operational expertise from a battlefield where innovation cycles are measured in weeks rather than years. Electronic Warfare & Airborne ISR are equally strategic. PEGASUS is a flagship European program, and we supply its core sensors and mission system, laying the foundation for the upcoming luWES program. That role strengthens European technological sovereignty in the domain where independence has become a strategic necessity.

We are deliberately extending this position into space. The war in Ukraine has shown that space-based sensing has become an operational requirement. We are building sovereign MDOcore-based sensing capabilities that integrate space into the same real-time picture as the land, air and maritime domains. For a company positioned as leader in sensors and multi-domain integration, that is the next logical step. Together, these positions give us exposure to some of the strategically most relevant defense programs in Europe for the coming decade.

Talking about HENSOLDT's strategic relevance, within 1 week, 2 federal ministers visited HENSOLDT, Boris Pistorius, Federal Minister of Defense in Oberkochen; Katherina Reiche, Federal Minister for Economic Affairs and Energy in Furstenfeldbruck. Two ministers, one message. HENSOLDT is central to Germany's defense and industrial strategy. In the words of Minister Pistorius, I quote, " I'm very glad to have such a reliable partner in HENSOLDT." These visits confirm that our technologies are recognized at the highest political level and that we are ready to deliver at the scale and in the quality Germany needs. That recognition shapes where Germany is placing its bets for the future.

CFSM is one of the most significant examples. The Combat Fighter System Nucleus sits at the heart of next-generation air combat, one of Europe's highest strategic priorities. Let me be clear on one point upfront. Our position in the air combat does not depend on the pace of any single program. FCAS, even without the next-generation fighters continues to represent the long-term European vision and while its future shape is evolving. Germany is advancing sovereign technologies through CFSM in parallel. We play a central role in both because our technology sit at the core of the architecture either way.

Within CFSM, we have been selected to provide the mission sensor system and the initial contract was booked in the first half. CFSM is also the first program where our partnership with Helsing moves from strategic agreement to operational implementation. We are combining software-defined capabilities with advanced mission sensors in future air combat information superiority designs. The strategic value, therefore, goes well beyond the initial contract. It reinforces our leadership in sensors, electromagnetic warfare and system of systems integration, and it positions us in the programs that will shape European air combat capability for years to come.

The F126 termination has drawn some attention, so let me address it directly. The financial impact is not material. The contract value was just over EUR 200 million and more than 1/3 has already been recognized as revenue. The remaining share, around EUR 130 million comes out of our order backlog. There is no impact on our short-term or medium guidance.

The fundamentals of our naval business are unchanged. Demand for naval sensors and mission systems continues to grow as European navies modernize their fleets over the coming decades. That structural trend remains intact. Our naval business is built around technology families rather than individual programs. The TRS-3D/4D radar family is deployed across multiple vessel classes, including F125 and K130 in Germany, and it has been selected by international customers like Brazil for the Tamandare frigates.

Continuous capacity upgrades benefit the entire family and create value well beyond any single platform or single customer. The recently approved MEKO A-200 frigates for the German Navy illustrates the point. They open new opportunities in a market where our technology is already established and competitive. F126 is a data point, not a signal about our naval business, our strategy, our technology road map and our market opportunities remain unchanged.

The previous slide showed our strategic position. This one shows how it translates into execution across all our 4 North Star axes. Deliver at scale. Our electronics production is ramping up significantly. Printed circuit board output has almost tripled since January from around 600 to roughly 1,500 populated boards per week. What matters is what the number represents. Our capacity investments are converting directly into industrial output. We are no longer building capacity for future demand. We are delivering into today's demand.

Pioneer software-defined defense. We have expanded the MDOcore ecosystem through 4 technology partnerships, each contributing a distinct capability. We are building an open ecosystem in which integration is a differentiator. That is the neo-system house in practice. Grow with focus. Our partnership with Bharat Electronics gives us a sovereign route into India's defense ecosystem and turns local content requirements into a competitive advantage. In one of the world's most important long-term defense markets, that is a strong foundation for future growth.

Lead our team into the future is about ensuring that our organization scales alongside our business. Our leadership team meeting aligned senior leaders around the next phase of execution across the group. As we grow across markets, technologies and geographies, consistent leadership becomes an operational capability in its own right.

Now I hand over to Christian, who will give you an update on our financials.

Yes. Thank you very much, Oliver, and good afternoon, everyone. Let me now walk you through our financial performance of the first half of 2026. The key message is pretty straightforward. HENSOLDT delivered a record first half with strong growth across all major KPIs. Most importantly, we continue to translate our strong market position and robust customer demand into tangible financial results.

Starting with order intake, the first 6 months of the year were outstanding. Order intake doubled year-over-year to more than EUR 2.8 billion, lifting the book-to-bill ratio to 2.4x. This strong performance was driven by several major contracts, particularly the armored vehicle programs and the Eurofighter Mk1, with initial contributions from Knifefish program and additional TRML-4D orders. This underscores what we have consistently highlighted over the past several quarters. Strong defense procurement dynamics continue to translate into robust order intake and long-term program commitments.

Revenue increased by 24% in the first 6 months to more than EUR 1.1 billion. Growth was driven primarily by the continued ramp-up in electronics and sustained strong execution in defense. As expected, successful milestone achievements in our key programs, Mk1 and PEGASUS resulted in higher pass-through revenues, which will gradually phase out over the second half. Core revenue, that is without pass-through gained further traction and increased by 18%, underlining the moment of our core business.

Order backlog increased by 46% to a new record high of over EUR 10 billion, providing excellent visibility for future growth. Importantly, a significant share of secured contracts extends well into the next decade, reflecting our strong positioning in major European defense programs. To sum it up, increasing defense spending by our German international customers continues to translate into strong order intake, accelerating revenue growth and long-term revenue visibility.

Let me now turn to our earnings and cash flow performance. Alongside our strong business growth, profitability increased at an even faster pace, underscoring the quality of our growth and execution effectiveness. Adjusted EBITDA increased by 29% to EUR 137 million, corresponding to a margin of 11.8%, that is up plus of 0.5 percentage points. This strong performance was primarily driven by higher volumes, particularly in our Electronics segment. In Sensors, our profitability benefited from revenue growth, too, but it was temporarily compensated by higher pass-through revenues as well as increased R&D spending.

Our adjusted EBIT increased EUR 70 million, driven by the same operational factors. With depreciation and amortization growing at a significantly lower level than revenue and adjusted EBITDA, the adjusted EBIT margin expanded by even 0.9 percentage points to 6.0%.

Turning to cash flow. Performance was in line with the usual seasonal pattern, reflecting our investing in working capital and infrastructure to support future growth. Higher advance payments levels provided the financial flexibility for these investments, leading to an adjusted free cash flow improvement of 25% year-on-year to minus EUR 136 million. In summary, profitability is well on track and set to gain further momentum as the year progresses.

Turning now to our segments, starting with Sensors. The Sensors segment delivered a record first half performance with strong momentum across both order and signal value. Orders accelerated significantly in the second quarter, resulting in almost EUR 2 billion of new orders in the first half of 2026. Consequently, the backlog increased to more than EUR 7 billion, providing long-term visibility. The strong order momentum was primarily driven by major contracts for Eurofighter, initial contributions from program Knifefish program as well as TRML-4D radars.

Revenue increased by 17% year-on-year to EUR 955 million, supported by accelerating dynamics in air defense solutions, particularly TRML-4D radars. Our integration business resulting from the former ESG acquisition as well as our service activities each contributed double-digit million euro growth. As highlighted earlier, milestone achievements in the Mk1 program drove pass-through revenues in the first half. We continue to expect a full year contribution of approximately EUR 150 million from this. Excluding pass-through revenues, core revenue increased by 10% to EUR 844 million, demonstrating the underlying strength and momentum of the business. This growth translated into healthy profitability. Adjusted EBITDA increased by 8% to EUR 113 million, corresponding to a margin of 11.9%.

Segmental profit benefited in particular from higher volumes in TRML-4D and our integration business. At the same time, the margin was temporarily diluted by a higher share of pass-through revenues and continued R&D investments. Overall, Sensors continues to benefit from strong demand across the portfolio, combined sustained profitability with a record order backlog and a strong foundation for long-term growth.

Moving on to our Optronics segment. Optronics continued its strong momentum and delivered another strong set of results in the first half of this year. Order intake increased significantly to more than EUR 900 million in the first half of the year, representing an almost sixfold increase compared to the prior year period. This exceptional performance was driven by major armored vehicle programs, including Schakal and second batch of Puma. These orders further strengthen our key position on European platforms and enhance long-term revenue visibility.

Sales increased substantially by 63% year-on-year, supported by strong growth across all businesses. In particular, ground-based systems sustained their momentum, while also additional revenues from the Luchs 2 program further contributed to segment growth. The strong top line performance also translated into significant profitability improvement. Adjusted EBITDA increased to EUR 24 million, resulting in a margin of almost 11%. The significant uplift was driven by continued revenue momentum across the business and increasing economies of scale. Overall, Optronics demonstrated its ability to convert a substantial order backlog of more than EUR 3 billion into strong operational performance. With continued demand across key European land platforms, the business is well positioned to sustain its growth trajectory in the coming years.

Let me now turn on to our guidance and outlook for the remainder of the year. Building on a very strong first half, we remain firmly on track and therefore, reaffirm our guidance across all key KPIs. As you are aware, business activity is typically weighted towards the second half of the year, particularly in the fourth quarter. While our strong H1 performance provides a solid foundation, we remain focused on delivering our targets for the second half.

Starting with order intake, we continue to expect a book-to-bill ratio between 1.5x and 2x, supported by sustained defense procurement dynamics across our key markets. For revenue, we continue to expect a growth to approximately EUR 2.7 billion. We forecast an adjusted EBITDA margin in the range of 18.5% to 19%, reflecting our continued focus on profitable growth. As updated on June 1, we expect cash conversion of approximately 50%. This reflects continued positive impact of customer advance payments, which support our investments in capacity expansion, including our new radar production facility in the neighborhood.

Finally, we continue to target a leverage of around 1.5x while maintaining our dividend policy of distributing between 30% and 40% of adjusted net income. For the midterm, we expect order intake to continue to outpace revenue growth, translating into average annual organic revenue growth to around 15% to 20%. Again, growth is likely to be more back-end loaded as large programs ramp up. Margins are expected to expand by approximately 50 basis points per year, supported by scale effects and productivity gains, while cash conversion normalizes towards 50% to 60%. In summary, our outlook combines strong top line momentum with sustained profitability and disciplined financial management.

And with that, I will hand over back to you, Oliver, for an update on key orders for 2026 and beyond.

Well, thank you very much, Christian. Since our last analyst call, we have seen tangible progress across all our sensor pipeline with several key opportunities converting into book business. Eurofighter is one example. Orders for the Mk1 rebaseline, the Spanish Halcon program and from Turkey have materialized, contributing around EUR 580 million of booked orders.

TRML-4D and Knifefish are following a similar path with initial tranches already secured and substantial opportunities ahead. PEGASUS remains one of the largest opportunities in front of us with a potential order volume of around EUR 900 million for the second German batch. One program deserves a particular mention, luWES. Building on the technology and the operational experience we have gained through PEGASUS, we believe we are very well positioned to play a leading role in this program. The overall opportunity ranges from several hundred million euros up to billion euro levels. All in all, the message is clear, our Sensors pipeline remains broad and continues to convert into high-quality order intake across multiple programs.

Turning to Optronics. We continue to see a very strong momentum with a significant share of the expected order intake already secured. The largest contributions come from Puma and Schakal. Together, these programs amount for around EUR 800 million of booked orders and are now firmly in execution. This underlines the strength of our position on 2 of the Bundeswehr most important land platforms. Following the large German order last year, Leopard 2 now provides further upside into international markets with the first EUR 20 million already secured and reflected in order intake. U212 CD highlights the breadth of our portfolio in Optronics.

TKMS has been selected in Canada as preferred bidder and our optronics smart systems will be part of the offering. Taken together, these programs provide a strong foundation for continued growth in our Optronics business across the full range of platforms that define European conventional capabilities.

Before we come to the key takeaways, let me share one broader observation. We are often asked whether defense spending is shifting from conventional capabilities towards the next-generation systems. That question is built on a false premise. A tank cannot be replaced by a drone, but the drone changes how a tank is deployed, protected and supplied. The 2 are not substitutes. They are part of the same system. Modern armed forces need both at scale connected through an architecture that processes information and adapts faster than the adversary.

Three conclusions follow for HENSOLDT. First, conventional and next-generation capabilities are complement. Our sensors provide the situation awareness on which drone operations, air defense and software-defined command all depend. Without the sensor layer, the software layer has nothing to work on. Second, our positioning across technologies, platforms and domains structurally reduces program risk. We have seen that from several angles today in the parallel development of FCAS and CFSM, and in the F126 termination. Our investment case does not rest on the trajectory of any single program or customer.

Third, defense spending is expanding across conventional platforms and next-generation capabilities at the same time. A company positioned in only one of the parts of that spectrum captures only part of the opportunity. We are positioned across both. Today, the constraint is no longer defense budget. It is industrial capacity and technology innovation. That is precisely where we have invested, and it is where we continue to execute.

Let me conclude with a few takeaways. The first is that our operational execution is progressively translating into measurable results. Record order backlog of more than EUR 10 billion provides excellent visibility, revenue growth is accelerating and higher production volumes are driving improved profitability. At the same time, the investments we have made to deliver at scale are increasingly visible in our industrial performance. Second, our strategic positioning continues to strengthen. We are expanding the software-defined defense ecosystem through new technology partnerships, while our platform-agnostic approach is proving its value across programs, technologies and domains. That gives us resilience as well as access to a broader set of opportunities.

Third and finally, the long-term demand environment remains highly supportive. We continue to expect major contract awards. Our industrial footprint expansion is progressing as planned, and the NATO Summit has further reinforced the multiyear investment cycle across our portfolio in core markets. Taken together, these developments demonstrate our ability to convert structural demand into operational performance while continuing to strengthen our strategic foundations.

And with that, we are happy to take your questions.

[Operator Instructions] And the first question coming from Marco Vitale from Mediobanca.

A couple of questions from my side. The first one is you could provide us an update on the naval pipeline after the F126 cancellation. Also, if you could quantify the magnitude opportunity you see for the, say, U212 CD campaign, successful campaign of ThyssenKrupp with Canada.

Second one is on space that you mentioned during the presentation. Could you provide us with additional comments whether you want to pursue this opportunity with a maker buy strategy? And what would you be interesting in adding this domain?

Marco, can you please repeat the question? So for the first one, I understood it's a little bit on the consequences of FY '26 and the naval market in general? Or I'm very sorry, there was an audio problem here.

No problem. Yes, it was just a broad question on the pipeline that you see on maritime after the frigate cancellation. What could be the opportunities you are looking at also and if you could provide or try to quantify the magnitude of opportunity that you see from the export orders from Canada for the submarine recently won by ThyssenKrupp Marine.

And then the second one, if you could add comments on space that you mentioned, you are very interested in expanding this domain. What could be the strategy? And also how do you want to pursue these opportunities from an organic standpoint or M&A?

Okay. I mean I'll start, Marco, with the naval opportunity. So I mean, I won't repeat what I said during my presentation. So again, F126, yes, there is a decision, which is still evaluated. I think also on the customer side, a lot of, let's say, administrative formal legal work has to be done. You read the media that the prime went into it. In a more conservative approach, I think we digested the financial impact. And as we outlined very clearly, no material impact on our financial performance or guidance.

The strategy, and I just want to stress that point again. The strategy for the naval market is still on. First of all, I think we have a very competitive product with TRS-4D, which, by the way, was a mandated product in the F126 campaign. And definitely, we see that the concept of having a harmonized radar family within the German Navy is on and also international campaigns in Asia Pacific. I mentioned the Tamandare case, where, by the way, Tamandare is a MEKO A-200 kind of derivative where we have put our radar as well. So I think that also opens opportunity for additional batches of MEKO A-200 in Germany.

The second topic, which I think underlines that our naval strategy, future opportunities is strong is that we have a strategic cooperation with Lockheed Martin Canada. We are the strategic partner of bringing this system, CMS 330 to Germany. And also what has been confirmed to us is that the F126 decision, which actually had a Thales combat management system, that this has no impact on the confirmed strategy of the German customer to harmonize their combat management systems across the fleet and the CMS 330 from Lockheed Martin has been preselected. And I think that again confirms a broad range of opportunity in the German market.

But also being well aware that Germany, and that probably leads to the U212 CD that this cooperation with Canada, where I would see U212 CD only as a first step opens a broader corridor for cooperation. And I think, first of all, U212 CD is the roughly EUR 200 million. But of course, we have to accept that TKMS so far has only been selected as a preferred bidder. So the negotiations will start. So that is the rough magnitude of the opportunity, EUR 200 million, as I outlined. But again, there are ideas of opening bidirectional streets, bringing Canadian technologies to Germany, bringing German technologies to Canada, where, of course, with a footprint that we do within Canada, we see also a lot of opportunities coming up.

And for the second one, is it luWES that actually you want a bit more of color?

I was actually interested in hearing your thoughts on space domain on Page 4 of your presentation. Yes, exactly.

Yes. Okay. So basically, and I think it was public, I joined our Chancellor and also Minister Pistorius when they visited Andoya as part of G2G discussions, how could Germany and Norway combine their strength in actually building an ISR space constellation. So these discussions are ongoing. At the same time, you've heard of a German program called SPOCK, where the first batch has been awarded to Rheinmetall with ICEYE. But again, it's fully open how SPOCK-2, the broader ISR constellation would be awarded. So this could be a competitive tendering, and that could even move into a broader kind of also time-sensitive targeting capability.

And we have joined forces. We have teamed up as we also made public with OHB, with Helsing and Kongsberg. We have agreed that HENSOLDT would provide the sensor capability, and that ranges from radar -- synthetic aperture radar capability. Actually, we have a clear technological product roadmap to bring our PrecISR radar, which has a lot of interest in the market and advanced synthetic aperture radar into space. So that is part of the sensor package. Also, we are very strong in bringing electro-optical infrared capabilities into that market.

And what we also see is talking about PEGASUS that some of the sensors, the signal intelligence sensors would also not only be employed across the naval, land and air domains. I think talking to our customers, there's a significant need to bring signal intelligence, electromagnetic warfare also to space, and that will be part of our value proposition.

The next question comes from Ben Brown from Jefferies.

I have 2, if I may. The first is, if I look at the revenue guide, it implies a slowdown in H2 versus H1. I assume a proportion of this is on the lower pass-throughs. But if you could give us some help on some of the other moving parts here, that would be great.

And the second question is on the Sensors margin. The decline year-on-year, I know there's a lot of pass-throughs in there. But if I also look at excluding pass-throughs, there's a small decline as well. I know you tend to have an acceleration in the second half and pass-through should be lower. But again, how should we think about the moving parts for achieving the 19% margin target you've previously pointed to?

Ben, thanks for your question. So the first question, 2 comments on that. Of course, pass-through will slow down in the rest of the year, we approximately think that we will be around EUR 170 million in pass-through revenues. That means we will only make another EUR 50 million to EUR 60 million instead of having the same amount also in the half year. So this is one effect.

The second is, let me clearly point it out, the first half year gave us excellent tailwind for the second half year. Nevertheless, we have 60% ahead of us and maybe we are a little bit cautious in this moment, but I see a very good baseline to deliver on our full year guidance and maybe a little bit beyond.

Regarding the Sensors margin, yes, we have a little bit of a slowdown, but this is due to the fact that costs always run in a linear mode, whilst revenues, especially in the Sensors segment run exponentially into the Q4. And we have some investments. The one is for the RDS44, for the second production line CLM40 Inspector. Most of CapEx is CapEx, but there are also costs for hiring people, training people without having any coverage for projects before they can work them next year on it. And the next thing is that we've clearly committed to spend for R&D. So Oliver has mentioned MDOcore will be significantly invested. And these investments weigh on H1 sensors, but I'm absolutely sure that it will phase out until year-end and the revenues kick in, in this segment, we will be well on track to deliver on our margin guidance.

The next question comes from Sebastian Growe from BNP Paribas.

Two questions. One said more on the order pipeline and the other on the guidance, maybe we can separate the 2. So if I may start on the orders, I've noticed that there has been an upgrade by around EUR 80 million for the Eurofighter part in the order pipeline as opposed to what you had disclosed in quarter 1. So what's been the driver here? And I was also wondering whether there's a similar potential for other programs that you might see? And then I have a couple of questions related to PEGASUS in particular. Can you remind us of the potential there for export contracts and more specifically, which milestones would have to be passed here? Or are you already actively offering the solution to potential export customers? And lastly, how might the margin profile differ between domestic and export, at least indicatively? Yes, if we could start there, please.

Yes, Sebastian, thanks for your question. So first of all, what will the order pipeline look like in the second half year? So we have now collected EUR 2.8 billion, whilst EUR 1.9 billion amounts to Sensors and approximately EUR 1 billion to Optronics. We see especially some more orders in the Eurofighter program. It will be an order due to the fact that we have still some legacy topics in the MK1 radar. So the SDC, the power unit, which is in and Germany and Spain have both decided that they will be replaced and it will be a significant one in the second half year, so approximately EUR 200 million, EUR 300 million amount, which we will see.

The second thing is, of course, the nicest program. It's an EW program for land sources, a combined multinational program where we equip the PIRANIA platform with our [ EW ] capabilities, and we also expect this program in the second half of the year, which also will be a triple-digit million amount coming to our order book. Then we see some more demand for air defense CLM 30, especially from Ukraine, where we see another batch coming up in autumn, which will give us some more orders. I think we have elaborated in the Optronics segment that there will be some network international programs, which is another part.

And then, of course, the last big one is the PEGASUS. Maybe I'll start with the current situation around the second batch and Oliver continues with export. So we have now -- we have the request for proposal done. We will give our bid in the beginning of next week to the customer and then the negotiation phase starts so that we are very confident that we can do this in this year, but time is running. I have to say that it will be a December race. Let me say it like that. But currently, all the forces work like hell, but it works for the second lot. And these are the big bulks we see in the order pipeline for this year. And maybe with that, I hand over to Oliver for the export campaign for PEGASUS.

Yes, absolutely. Sebastian, so talking PEGASUS, I make a preliminary remark. So what is worth to note is that the program is really on a very good track as far as the remaining milestones for this year are concerned. And it's not that we have no doubts. We are absolutely confident that we will hand over the first capability to the customer mid-2027, which is a bit earlier than initially anticipated, and that's based on the contract changes we have agreed with our customer end of last year. And of course, that good news spreads to our customers.

So our export campaigns, and please understand that I cannot name the countries. But what I can say that we initially started our export campaigns with 3 global customers, partially also with the support of the German Air Force at the exhibitions and special venues, looking at Asia Pacific and so on. But at the moment, and that is since quarter 4 last year, the focus shifts on 3 European customers, 2 of them with a very strong G2G agenda between the respective air forces.

So in that regard, still having a full priority on execution in our ongoing program and on the amendment, the extra batch that Christian talked about, I definitely see that the export campaigns are maturing and that we would see next, but most probably the year after the first of those campaigns coming into our books.

Margin-wise, it is worth to note that also the team that we have set up for PEGASUS, HENSOLDT, Lufthansa Technik, Bombardier is really strengthening the ties also with the perspective of luWES. And looking at all the experience, the maturity we get into our industrial capacity relating to the antennas that are part of PEGASUS, considering that part of the mission system is software that would need to be multiplied then with our customers, I'm pretty confident, and I have to go from Christian that the margins will go up.

Encouraging. If I can just clarify that I've got this right. So export contracts might be received by '27 for the first time. That's the message, right?

That case, late '27, but I mean, we definitely need to consider it's a complex program. But I mean, looking at the speed, to be honest with you, that we picked up since quarter 4 last year, especially related to these new European customers, I'm confident realistically, and you know we are taking more conservative approach, I would see it in 2028.

Okay. That's helpful. And then talking about conservatism. And let me then move to the guidance. What I've noticed is apparently that your guidance now implies quite meaningful deceleration in top line growth in the second half of the year compared to what you printed in the first half. So I was just curious to hear if this is mainly project or phasing related? Or do you feel more confident with regard to that very sales target now after how the first half has played out?

Yes, of course, one is clearly I have to elaborate on [ FAR ], which will be significantly lower, but let me face like that. I feel very comfortable for the second half year as it is H1.

The next question comes from Sash Tusa from Agency Partners.

I've got a number of questions. The first is just on your confidence on naval and particularly on the MEKO A-200 frigates. I'm rather struck by the fact that TKMS signed a contract with Saab about 2 weeks ago, specifically to fit out the first MEKO A-200s with Giraffe flat-based radars, Giraffe-1X, 9LV combat systems. So what -- and yet you still seem to think that the whole MEKO program is up for grab. So I wonder if you could explain the difference between your confidence that you can get on to the MEKO's and TKMS's confidence that it should go with Saab as the supplier for those systems. So it seems to me that, that pretty much fills out all of the slots that you would otherwise be bidding for.

And then the second issue on luWES, I wonder if you could explain how the requirement is changing. I think if I heard you rightly, you said that your opportunity is somewhere between hundreds of millions and 1 billion or thereabouts. That seems to be a much smaller program than when you were talking about it at the Capital Markets Day last December. Has the program shifted from being a standoff, stand-in jammer based on a Global Express to just being payloads, because it seems to be a much smaller program than PEGASUS in terms of the value per aircraft.

Okay. So Sash, let me start with the question on the MEKO A-200. So yes, indeed, I'm also reading press releases. But I think definitely why are we still confident is because my understanding is very clearly that what is contracted and awarded now is the first batch. And I fully acknowledge that this first batch also like the F123 today is with a Saab mission suite. But again, also following the parliamentary decision, there is a clear conditional approval, which kind of guides that the future batches also need to consider some of the suppliers from the F126.

So that is one thing. But more importantly, for us, it's definitely the reconfirmation that we have achieved from our customers that the family concept, TRS-4D is still on and then also the concept of having a harmonized command control system or battery management system, which is the CMS 330, which is selected is needed. And why is that confirmed? Because it's not only about buying new ships. I think the key role, and I'm talking to the senior leaders of the German Navy, the key element is also to maintain and operate the fleet. And if they would have a heterogeneous landscape of systems under, of course, the time pressure that they see today, then they would have really a hard time to operate them.

And that's why we think that at the moment, and it's more than we think the discussions we are having at the moment is that also the F126 decision triggers and you read a couple of articles on the F127 triggers a discussion how would a more modular, scalable fleet of the German armed forces look in the future. And that is why we see the picture a little bit different especially looking mid- to long term, and that includes the batch 2 of the MEKO A-200.

And what also -- and that is confirmed by TKMS, fuses our confidence is that the CMS 330 as well as the TRS-4D are already integrated. We have references on the MEKO A-200. So time is not an issue. And we consider ourselves also based on market information and other tenders to be very competitive on pricing vis-a-vis Saab, and we are ready -- more than ready and determined to enter that battle.

Just to be totally clear, so your confidence is about the second 4 ships of the MEKOs, you think that the first 4 ships are effectively an interim batch and then there will be a change of systems to ensure commonality with F127.

The next question comes from -- sorry.

Yes. There was a luWES question on the requirements, and I can make that very short as -- and that confirms that also on luWES, we have a very strong dynamics. So if we are successful and luWES comes, I would see the order intake rather at the upper end of what we have just described. And the question why we went into that kind of corridor approach was we were not so clear at that time, would we be ready to approach also based on internal process and then so on to approach that one on the top level, as I would say, as a kind of prime or consortium partner in a broader sense.

And that, of course, has an impact. Do we only deliver the payload or take -- do we take responsibility on the overall program. And as we are advancing, so we expect the tender to be out somewhere in August, as we are advancing in the campaign, definitely, our ambition is to go for taking a broad responsibility, and that's why we will end up in the upper corridor of what I've just said before.

And sorry, just to confirm the upper end of the corridor is EUR 1 billion or billions?

It's billion, multi-billion.

The next question comes from Ross Law from Morgan Stanley.

So 2 quick ones, please. Just on Optronics, another quarter of better performance in Q2. Can you just confirm what you're expecting in terms of margin for the full year and also expansion over the coming years? And then on your FREYJA program with Fire Point, could you maybe just give us an idea of what this might do or contribute in terms of revenues medium term? I apologize if either of these questions were already answered in your opening remarks. I joined the call late.

Ross, thanks for the question. I start with Optronics. Yes, you're right, second quarter as strong as the first one. I have to say there were some revenues in -- which I do not see in the second half year. So the 60% I do not see year-over-year for the full year. I see approximately EUR 500 million of revenues, maybe a little bit more in this regard in the segment. And I see still 16%, maybe 17% of margin in this segment for this year. We have assumed in our midterm plan that we increased the margin 2% per year.

I think this is a very solid assumption, but I'd like to now move on until the end of this year, review how we ramp up with the ground-based system delivery and when we are very stable when all the measures we currently take in production, multi shifts and so on pay off, we again have another industrial base, very solid to go ahead. But for the time being, I would like to stay with that.

Okay. So I take the second one on FREYJA and maybe upfront, please also understand that we cannot disclose too much on the content and for operational security reasons. However, what I can confirm is that ever after we have signed the MoU with Fire Point at Eurosatory, we have seen an unprecedented dynamics on the topic. And that was also driven by the Ankara Summit, where actually also the U.S. gave its approval that German -- Europe would work on a kind of patriot-like ballistic missile defense system.

And based on the dynamics that have been created in Ankara, there was a site meeting at the Coalition of the Willing meeting of the senior leaders in Paris, prior to the 14th of July, the National Day of France, where I have been invited amongst a handful of industry leaders and where we received a big push to bring this envisaged capability on ballistic missile defense to the battlefield in Ukraine and with that also providing a unique capability to the Europeans. I had a personal opportunity to meet President Zelenskyy during this event.

So the political push is very strong. Of course, industry cooperation is as strong as the political push. But I would see that this moves into '27 for the first things, but it would be absolutely premature to see how that would feed into revenue stream. What I can say that this will be about, of course, the radar capability that we already deliver into Ukraine and the investments we are currently taking to upscale our production capacity, which will be in operation early 2027 that perfectly fits because it gives us the scale to answer this demand. And then it would be also about widening the capabilities to have more strategic, more long-range radar coming into the game. And that's the background. But again, premature to really build that into concrete revenues and planning.

The next question comes from Christophe Menard from Deutsche Bank.

I had 2 actually on sensors. The first one is, I mean, you highlighted your win with the Turkish order for Mk1. Actually, Mk1 seems to be a little bit the radar of choice on Eurofighter of late. I mean you had the German, Spanish, now Turkish order. I mean, for future orders, if there are any for Eurofighter, should we assume that Mk1 is best positioned, so it will kind of de facto a bit go to you, considering I think there are 3 rated choices on this one.

And the second question is on GCAP. We heard yesterday from -- well, from BAE that the window for Germany was closing soon, if they want to join. How would it work actually for you? Because if Airbus joins, are you automatically joining or you also need to negotiate with the consortium to be able to enter GCAP? Or would it be through LEONARDO?

Okay. On the first one, of course, it's a difficult question. So I'm a bit bold on this one also to support our engineers. I think Mk1, Mk2, and that's actually what we need to look at, because Mk0 is the baseline capacity, where now as we have the hardware under delivery, as the software is ramping up, for sure, whenever we will be selected for the radar, it will be Mk1. And what I would boldly claim is that looking at the cycles of development, also at the technical maturity, we are advanced compared to what we see on the other radars.

But in the end, and that's why probably it's rather a question you need to ask to our customers, the Eurofighter program is also very, let's say, influenced by political minds. It's a 4 nations program where, of course, the industries representing their nations have some, let's say, also political arguments, which would be the one of choice. But purely from a competitive positioning, I think our Mk1 is proving the pudding and it's really the radar of choice at the moment.

On GCAP, and Christophe, you are at least -- I don't know what David will ask us, but that's a tough question. As this is a total, let's say, political discussion at the moment. And to be honest, it is absolutely not clear which direction our customer, the German government will take on future cooperation. So I think definitely, what we saw in ILA is that this Team Generation 6 that where HENSOLDT, of course, is part where Airbus at that stage, I would say, is not the kind of prime, but a primus inter pares leading the stories on very much eye level with the CEO, we're approaching that point.

And I'm very happy that at least we got the clarity that the next-generation fighter would no longer be the cooperation between Germany and France. But also here, ever since a lot of discussions are taking place, some of them looking at continuity, how would we sustain the engineering force, which is significant, not only in HENSOLDT, but across this Team Generation 6. And there are a couple of ideas on the table, how would we strengthen from the sovereign, but also with the other partner, the Spanish partner, how would we strengthen our value proposition for any program that we might join.

And here, of course, we have the Nordics, we have Saab. We are also looking at a broader G2G. We see strong things. We have GCAP, which is considered or other options, which might build up. So HENSOLDT is well prepared. Again, we will see what kind of contractual models would arise. But I think the discussion that we are having at the moment is very transparent and led on high level by all the players in the room.

And as I outlined in my presentation, what is, I think, important for us for the resilience for our future guidance, while we are approaching in that direction, the next-generation fighter, whatever partnership and contract that would be is one thing. CFSN and our position for the CCA for the collaborative combat airframe with CA-1, with Helsing, but also the MoU we have signed with Boeing on the MQ-28, I think also in that segment, that new segment, which sees a lot of dynamics, HENSOLDT is strong.

And on top of that, and that's the third part, independent because all these dynamics that we see in the programs, HENSOLDT is reacting, and we are driving our radar agendas to also be prepared to answer any kind of platform that we would see in the Airborne segment in the future. So that is probably giving a little bit of additional light to the situation, which indeed is not yet 100% clear, a lot of political and also media claims. But again, we need to now look into all those different elements.

The next question comes from David Perry from JPMorgan.

It's late on a Friday. So I hope my questions are not annoying in a busy week for everyone. For you, Oliver, thank you for the slide on the beyond tanks or drones and just how HENSOLDT is positioned. And I agree with everything you say about that you're very diversified. It doesn't matter so much for you. I'd just be really interested in your perspective on the debate that may or may not be happening in Germany, whether you think the leaders, the generals, the politicians are actively rethinking where they allocate money or whether you think the plans, the current plans are quite firm.

And then my second one, and this is the annoying one. Christian, everyone has asked you about the second half guidance because as analysts, we all think the same. It does look very conservative. I guess my question would be this. I mean, if you have a semi-reasonable Q3 in terms of growth, you're probably going to be down in Q4 year-over-year in one or both divisions. So I was just wondering if there's anything you can see or you know today that's making you so cautious on the sales guidance because kind of, I guess, all the logic from all the other analyst questions, we all seem to think you're going to do a lot better than the 275, if I could put it that way.

Okay. So I'll start with the first one, David, and maybe a preliminary remark. Yes, it's a Friday afternoon. But just to give you a glimpse of how enduring Christian and I are, we started this day with our Supervisory Board this morning and of course, the pre-Supervisory Board committees yesterday. Then over lunch, quickly, we took a visit of the Minister-President, Cem Ozdemir from Baden-Wurttemberg, which was on top of Katherina Reiche, Boris Pistorius, a great success underlining the political backup that we have. And now we are taking your analyst call, and I hope you still see that we are on. And I would say that is also an element of the resilience that HENSOLDT brings to the game.

But to be more concrete on your questions, tanks and drones, indeed, I mean, that was the main theme when Boris Pistorius visited us, and I think that was really eye opening to him, and he made some statements when he left the company here, realizing that really we are bridging the 2 elements that are of utmost important to the German armed forces these days.

First of all, with many of the contracts we have in our books and more to come, they are scaling up their order of battle, as I would say, because credible defense and deterrence only comes if the German armed forces have the major weapon systems in Germany and at the borders to support and here, definitely air defense, looking at what we see in Ukraine, looking at what we see in Europe with ESSI, it is also very clear that Germany in itself is lagging behind and that we should expect a lot of more orders on air defense in Germany as we go forward.

So in that regard, I see that this will continue, and that's why Boris Pistorius keeps on stressing over and over again, it's not tanks or drones, it's both. And the best is if both are connected and what he realize is that HENSOLDT is really making significant progress on connecting those things. I mean we shared with you at the Capital Market Day, our MDOcore. And what I can share with you, we presented that on the exhibitions. And ever since, we are, at the moment, offering to 2 global customers first prototypes. So there are contracts -- sole source contracts ramping up to buy our software stack. And we have just recently entered a tender in Germany, which is looking for a -- and I stated clearly a Palantir-like solution.

We have the press with us with Cem Ozdemir today and probably you will read in the media tomorrow, that really we're positioning in that direction. And I would say not only with papers, what we showed to our customers in these discussions at the exhibition, the software is there. And why is it there? Because we bring all our experience on sensors, multi-domain, multiple platforms all the know-how that has grown over years. But in order to be quickly in the sense of time to market, we work with partners.

As you know, with Schwarz Digits, we work with IBM. We are really intensifying our cooperation with Helsing. We have small start-ups with agile and with Agentic AI. And all of that is very dynamic at the moment. So that's why I would see while the balance is coming, Germany investing into existing capabilities, exhausting their -- exploiting their framework contracts, all of that, which will continue some way, but also with luWES and the software data-driven topics, we see that all these new contracts and tenders are out. And I would see us based on also our sovereign core technology proposals that in many areas, we might be even sole source, trusted partners of our customers. And that is kind of a little bit more story to what we have explained in our presentation.

Yes. And the second question, David, your questions are never annoying. They come directly to the point. So what drives me currently, first is that when I look at H1, and you've seen 18% core revenue growth that approximately EUR 20 million, EUR 25 million are spillovers for 2024 -- for 2025 then to this year, which we could not make at the end of the year with spillover effects, and we have to take into account when we go for H2.

Nevertheless, I think the base is excellent. And again, we have also some one-off opportunities in the second half year. So the start -- the tailwind is excellent. Maybe we are very conservative at this stage. But I think September is the month where we will see that these opportunities will pay off or not. And then I think it's the right moment to update in this regard.

There are no more questions at this time. I would now like to turn the conference back over to Nicole Schillinger for any closing remarks.

Thank you very much for your questions and for taking the time to join us today. Should we have some follow-up questions, the IR team and I will, of course, be happy to assist. We look forward to speaking with you again soon. Have a great day.

Ladies and gentlemen, welcome to the Hensoldt AG Full Year 2025 Preliminary Results Analyst Conference Call. I am Matilde, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, it's my pleasure to hand over to Veronika Endres, Head of Investor Relations. Please go ahead.

Good afternoon, everybody, and welcome to Hensoldt's Full Year 2025 Preliminary Results Call. Thank you for joining us today. I'm Veronika Endres, Head of Investor Relations at Hensoldt. And with me are our CEO, Oliver Dorre; and our CFO, Christian Ladurner. Oliver and Christian will guide you through this presentation today, which will be followed by a Q&A session. And with that, I hand over to you, Oliver.

Thank you very much, Veronika, and a warm and cordial welcome to our valued investors and the analysts covering the Hensoldt stock. Let me begin with a clear statement. In 2025, we delivered on our commitments. Our book-to-bill ratio reached 1.9x. Revenue came in within the guided range. Adjusted EBITDA increased by 12% on a year-on-year to EUR 452 million, resulting in a margin of 18.4%, fully in line with the guidance we updated in October. And free cash flow significantly exceeded expectations at a level of EUR 347 million. These figures tell an important story. A book-to-bill ratio of 1.9x is not just a strong order intake number. It is tangible evidence that the Zeitenwende 2.0, as we call it, has moved from political announcement to contractual execution.

Accelerated defense budgets are translating into funded procurement decisions. And those decisions are arriving in our order books. Demand is concrete and operational. At the same time, the increase in adjusted EBITDA to EUR 452 million shows that we are managing growth with discipline. A 12% improvement in comparison to 2024 reflects emerging scaling effects while we continue to focus on efficiency. Free cash flow of EUR 347 million reflects a strong operational execution, but also a structural evolution in contract arrangements, which, for example, now increasingly include advanced payments. In other words, our customers are co-financing development and production ramp-ups. That strengthens our liquidity position and supports disciplined industrial expansion.

Revenue development within guidance underlines another important reality, scaling defense electronics production is a complex multiyear process. It requires stable supply chains, industrial precision and a careful ramp-up management. We are giving this maximum attention because reliability and delivery remains our first obligation to the customers. Taken together, 2025 was a strong and balanced year for Hensoldt financially, operationally and strategically. The figures you have just seen do not stand on their own. They are embedded in a geopolitical environment that has changed fundamentally. The Munich Security Conference 2026 made this shift unmistakably clear. The international order has entered a new phase of open great power competition from Russia's ongoing war of aggression to China's expanding global ambitions and multiple overlapping crisis from the Middle East to East Asia.

At the same time, the transatlantic relationship remains defined by strategic necessity, yet also by increasing uncertainty. While the United States continue to emphasize burden sharing under America first priorities, Europe is debating greater military self-reliance amid declining confidence in long-term U.S. predictability. Yet the conference also signaled recalibration rather than fragmentation. NATO cohesion and G7 coordination remain central, while Europe is positioning itself as a more autonomous security actor, strengthening its defense, industrial base and expanding partnerships beyond the traditional Western framework, for example, with India.

Against this backdrop, we are operating in a phase of persistent instability. Capability gaps are accumulated over decades are now being addressed with urgency. The demand we see is structural. It is not headline driven, and it does not depend on the precise trajectory of the war in Ukraine. Even in a scenario of reduced hostilities, strengthen air defense and expand ISR and electromagnetic warfare capabilities, the deficits are known. Political decisions have been taken. Funding frameworks are in place. Temporary market reactions to ceasefire discussions do not alter this underlying reality. The rebuilding of European defense capacity is a multiyear undertaking embedded in national force planning and procurement pipeline.

For Europe, this has translated into a clear shift in posture. Budgets are structurally higher, commitments are framed as multiyear contracts and the sovereignty in critical technologies has become central. The European industrial base is being strengthened deliberately, not only to secure supply chains, but to ensure autonomy in such domains such as sensors, data processing and the electromagnetic spectrum. For Hensoldt, this environment has very concrete implications. The immediate priority for many customers is what we call fight to night, operational readiness today. And this is where software-defined defense becomes a central lever. Real-time multi-domain data fusion and AI-supported analysis shorten the sensor to shooter cycle and increase resilience in a contested environment. Software upgrades enhance capabilities without waiting for new hardware platforms.

Modular architectures enable sovereign agility and scalable deployment under European control. In short, the geopolitical shift drives demand. Europe's response provides funding, software-defined defense translate both improved deployable capability. Let me connect the geopolitical backdrop to something very concrete, procurement execution. Throughout 2025, we have tracked these milestones carefully. And the central point today is this. The assumptions we made about acceleration have materialized exactly as expected. Three developments define the end of the year 2025. First, the 2026 budget has been formally approved with the regular defense budget rising to around EUR 82.7 billion. At the same time, the Sondervermogen Bundeswehr is effectively fully committed through authorization frameworks. The transition from extraordinary funding to structurally higher annual budgets is underway.

Second, the planning and procurement acceleration law has been enacted. This is structurally important. It shortens administrative cycles and reduces procedural delays, enabling faster contract awards. In addition, we are seeing an increasing number of projects with limited competition or even direct contracts, reinforcing our position as national champion. Third and most telling is the parliamentary approval dynamic. In 2025 alone, the budget committee of the German Bundestag approved 103 so-called EUR 25 million proposals, 103. The total volume amounted to approximately EUR 83 billion. To put this a little bit into perspective, before 2022, Germany's annual defense procurement spending typically ranged between EUR 15 billion and EUR 20 billion. What we saw in 2025 is, therefore, not a marginal increase. It represents a historic step change in procurement scale.

The December sessions alone illustrate this acceleration. In a single meeting on 17 December, 30 major projects with a combined value of nearly EUR 50 billion were approved. For us, many of these approvals are directly relevant, Eurofighter Mark 1, Pegasus, reinforcement of IRIS-T and major land system upgrades such as Luchs 2, Puma and the remotely controlled Howitzer RCH-155. These are not abstract budget lines. They are funded programs entering execution. And this is precisely the procurement environment behind our 1.9x book-to-bill ratio. The order momentum we reported is not speculative. It is rooted in a historically unprecedented approval dynamic. Looking into 2026, the pace remains elevated. More than 70 major proposals are planned with an expected volume of at least EUR 48 billion.

While this may not repeat the exceptional peak of 2025, it confirms that the acceleration is embedded in a multiyear force planning. In short, 2025 marked the transition from political intent to structural procurement execution at a scale Germany has not seen before and at a scale that will be sustained over the coming years. Let me now move from parliamentary approvals to what has actually entered our order book. The orders we secured in 2025 reflect 3 characteristics: scale, technological depth and geographic breadth. In our Sensors segment, intake was driven by major European air defense and reconnaissance programs, including Eurofighter, radar developments, Pegasus rebaselining, sustainment activities for maritime patrol aircraft and next-generation radar systems such as Spexer MKIII. These programs underline our strong positioning in air defense, ISR and electromagnetic spectrum capabilities, domains that are clearly prioritized in Europe and the overall force planning.

At the same time, the portfolio is not limited to Germany or Europe, a EUR 60 million contract for an obstacle avoidance system for the Indian advanced light helicopters illustrates the effectiveness of our grow with focus strategy. It shows that our technology is competitive in selected international markets and that we are expanding in a targeted and disciplined way. In our Optronics segment, the picture is equally compelling. The landmark Luchs 2 contract with its Ceretron sensors suite and integrated self-protection systems represents a structural upgrade in how land platforms are equipped. It moves us further towards connected software-enabled architectures.

In addition, we secured substantial orders for sighting systems, self-protection solutions and border surveillance sensor suites across Europe and North Africa. These contracts confirm strong demand not only for new platforms, but also for upgrades and capability enhancements of existing systems. Taken together, the 2 slides demonstrate that our order momentum is not concentrated in a single program or geographical area. It spans air, land and maritime domains, it covers new development, upgrades and sustainment, and it reflects both domestic strength and selective international expansion. This breadth is important. It increases resilience, improves visibility and supports margin quality across the portfolio.

Let me now turn to partnerships because the next phase of defense capability cannot be built in isolation. I would first like to address a topic that has been mentioned by some of our analysts in their reports, namely the statements Leonardo's CEO, Roberto Cingolani, made in his analyst call yesterday. Leonardo is a constructive shareholder and an important long-term industrial partner for Hensoldt. We maintain a close and trustful dialogue. However, it is not our role, and we are not in a position to comment on shareholders' intentions or potential changes in ownership. Any decisions regarding shareholdings in Hensoldt are solely a matter for the respective shareholders. This applies to both Leonardo and the German federal government.

What I can say is this, Hensoldt is strongly positioned. We are delivering on our commitments. We are scaling our industrial capabilities, and we are consistently advancing our role as a leading European sensor house and increasingly as a neo system house. Our focus is clear. It is on execution, on performance and on creating long-term value. Now on to our recent partnerships. Over the past 2 years, we have deliberately positioned Hensoldt as a bridge builder within the evolving defense ecosystem. The partnerships announced in the past weeks are clear proof that this positioning is now operational. With Tytan, we integrate cost-efficient interceptor drones into our Elysion Mission Core. This strengthen our UAS -- counter UAS architecture, particularly for domestic critical infrastructures and selected international programs, including Ukraine.

It connects start-up agility with our system integration capability. With Schwarz Digits, we combine Hensoldt sensors and MDOcore with a sovereign classified cloud, fog and edge infrastructure. This enables secure data-centric defense architectures under European control and connects our hardware and software backbone with large-scale digital infrastructure. And with Helsing, we have entered into a long-term industrial cooperation to operationalize software-defined defense in deployable multi-domain sensor-to-shooter chains. This is about execution architecture, not conceptual cooperation. What unites these partnerships is more important than the individual agreements.

They show that Hensoldt connects 3 layers of the emerging defense landscape, disruptive start-ups, sovereign digital platform providers and new generation system primes. Modern defense capability is increasingly built as an interoperable multi-domain architecture. In such an environment, integration becomes the decisive function integrating sensors, fusing data, combining software layers and effectors across domains. That is the role we are assuming. We are evolving beyond a traditional sensor champion. We are becoming what I would describe as a neo system house, a system integrator built around data, software and electromagnetic spectrum superiority, capable of operating across air and space, land, sea and cyber domains.

To our knowledge, no other company in Germany combines this breadth of multi-domain capability under a unified software-defined defense architecture. This role strengthens our strategic relevance in future procurement programs and increases our resilience in a rapidly evolving ecosystem. And with this, I hand over to Christian with an update on operations and the financials.

Yes. Thank you very much, Oliver. So when we talk about growth, one key aspect is the systematic expansion of our industrial footprint. Thanks to early anticipation, we started implementing footprint expansions and efficiency measures already some time ago. Our Operations 2.0 targets reflect our ambitious growth trajectory with further expansions planned, especially for air defense radars and ground-based systems, ensuring we can fully deliver on customer requirements and sustain growth well into the next decade.

To enable this kind of scale, we are also continuously expanding our physical footprint and strengthening our industrial base. End of last year, we announced plans to increase production capacity for air defense radars from 2027 onwards. Already in 2026, we will launch a new repair center for ground-based systems to meet customer demand for spare parts and MRO services. Further expansions, including additional capacity for infantry sites are currently under evaluation. And beyond that, we are assessing strategic partnerships and selective M&A opportunities as well as outsourced manufacturing. Together, these initiatives lay the foundation for scale, efficiency and profitability.

Let me now guide you through our preliminary results for the year 2025. I'm very proud of our achievements and the strong performance in the last year. We once exceeded most of our KPIs. Let's now have a closer look on that. Starting with the top line, order intake came in at the upper end of the raised guidance, resulting in a book-to-bill ratio of 1.9x. This significant order intake was driven by both segments and several major programs, including Luchs 2, air defense radar such as Spexer and TRML-4D, as well as the Eurofighter program and Pegasus. Overall, order intake increased by 62% year-on-year, reaching an impressive figure of EUR 5.7 billion.

Revenue increased to EUR 2.6 billion with a strong growth in core revenue of 11% despite the slower start in sensors in the first half of the year due to the ramp-up of our logistics center. Optronics continued its strong momentum with revenue growth of 20%, primarily driven by ground-based systems. At the same time, parcel revenue decreased by 12%, leading to an improved quality of revenue. Building on previous year's strong order book, we substantially increased our order backlog by 33% in 2025, reaching a new record level of EUR 8.8 billion. This provides sustained strong revenue visibility for the future. And to sum it up and to reinforce what Oliver highlighted earlier, the acceleration in defense spending is now converting into material orders, underpinning a sustained growth path for the years ahead.

The strong top line performance in 2025 is also clearly reflected in our profitability and cash generation. Adjusted EBITDA increased by 12% to EUR 452 million with an adjusted EBITDA margin of 18.4%. The strong performance was driven by higher volumes and scaling effects, particularly in Optronics and supported by material synergies from the ESG acquisition. This was partly offset by the impact of the logistics ramp-up, which continued to diminish over the course of 2025 and by an unfavorable product mix in Sensors. Adjusted EBIT also increased by 11% to EUR 327 million, benefiting from volume effects and economies of scale. As a result, the adjusted EBIT margin improved year-on-year to 13.3%. Cash generation in 2025 was excellent.

Adjusted free cash flow increased by 39% to EUR 347 million. With a cash conversion rate of 77%, we clearly outperformed our guidance range of 50% to 60%. This strong performance was supported by advanced payments, while investments in inventories developed as planned to support the growing business volume. To conclude, the strong bottom line performance exceeded our guidance, reflecting disciplined execution and operating leverage. Now let's take a closer look at our segments. In the Sensors segment, we realized a strong order intake with an increase of 42% compared to previous year. In total, orders summed up to more than EUR 3.1 billion, resulting in a book-to-bill ratio of 1.5x.

Key drivers were orders for Air Defense radars, the Eurofighter program, Pegasus and P-8 Poseidon. Core revenue in Sensors increased by 10% to over EUR 1.9 billion. Despite the slower start in our radar production in the first half of the year, revenue growth was strong and fully in line with our expectations. The share of parcel revenue further declined to an amount of EUR 132 million. Adjusted EBITDA in Sensors increased to EUR 394 million with an adjusted EBITDA margin of 19.2%. Product mix effects had a minor impact on margins, while the effect from the logistical ramp-up further diluted until year-end.

Synergies from the ESG acquisition materialized as planned and that supported profitability. Turning now to our Optronics segment delivered an outstanding year. We once again achieved a record order intake, reflecting continued momentum with orders summing up to EUR 1.6 billion, representing an increase of 114% compared to the prior year. Optronics recorded a book-to-bill of 3.8x. Key drivers were the orders for Luchs 2, the Leopard 2 and orders for the Algerian land border surveillance. Revenue performance in Optronics was excellent with a 20% increase to EUR 419 million, driven by the sustained strong development of ground-based systems. The site move of ground-based systems was successfully completed and provides a solid foundation for further growth.

In terms of margins, Optronics showed a substantial improvement with adjusted EBITDA increasing by 140% year-on-year to EUR 58 million. This development was driven by higher volumes and economies of scale materializing due to production ramp-up. Now let me briefly comment on our balance sheet and net leverage development. Over the recent years, we have continuously reduced our net debt. Following the ESG acquisition 2 years ago, we quickly returned to a deleveraging path and reached a net leverage of 1.6x by the end of 2024.

At the year-end 2025, net leverage remained stable at 1.6x, while net debt excluding lease liabilities continued to decline, our increased lease liabilities kept net leverage stable. This reflects our planned investments and the sustained expansion of production capacity, including the move to our new Optronics site in Oberkochen. Excluding lease liabilities, net leverage declined to 0.6x compared to 0.9x in 2024. This underlines our highly cash-generative business model and our ability to further reduce net leverage following an acquisition. To sum it up, Hensoldt is in excellent financial shape with a conservative balance sheet in place.

Moving on to our dividend proposal. We have guided for a payout ratio of up to 30% to 40% of the adjusted net income 2025. Adjusted net income in 2025 sum up to EUR 170 million, slightly below last year. Main driver were higher income taxes as the prior year still benefited from tax loss carryforwards. Due to the excellent business performance and strong cash generation, the Management Board intends to propose a dividend per share of EUR 0.55 to the Supervisory Board and the AGM. And this marks a 10% increase compared to dividend in 2024 and corresponds to a payout ratio of 37% of adjusted net income 2025. So let me now present our specified guidance for 2026. First and foremost, order intake. Driven by the sustained high demand and order momentum, we expect the book-to-bill ratio in 2026 to remain strong between in 1.5 and 2x.

For revenues, we are specifying our guidance to approximately EUR 2.75 billion. Furthermore, we increased our guidance for adjusted EBITDA margin to a range between 18.5% and 19%. This reflects our focus on sustained strong profitability while investing in our capacity to support long-term growth. For adjusted free cash flow, we continue to expect cash conversion of around 40%. As outlined in the Capital Markets Day, this reflects our planned CapEx for infrastructure expansion, in particular, for our new radar production site. For net leverage target, we specify our guidance to around 1.5x. As we expand our operational footprint, lease liabilities are expected to increase.

Apart from this noncash effect, net leverage would decrease even stronger. Finally, our dividend payout ratio will continue to be in the range of 30% to 40% of adjusted net income, in line with our commitment to shareholder returns. For the midterm, we confirm our targets outlined at our Capital Markets Day in November. We expect order intake to continue outpacing revenue growth, translating into average annual organic revenue growth of around 15% to 20%, likely more back-end loaded as large programs ramp up. Margins will continue to expand by about 50 basis points per year, reflecting scale and productivity gains, while cash conversion normalizes to around 50%, coming back to 50% to 60% from 2028 onwards.

Finally, our dividend payout ratio will continue to be in the range of 30% to 40% of adjusted net income while maintaining a conservative financial profile. And going forward, our priorities for capital allocation remain unchanged. First, fueling the growth. We continue to invest Hensoldt 2.0, scaling production, strengthening technology and developing our people. Second, sharing growth. We maintain a 30% to 40% dividend payout ratio of adjusted net income, ensuring shareholders participating in our success.

And third, strategic acquisitions. We pursue value-accretive M&A, focusing on technologies, markets and capacities that strengthen our core capabilities in the value chain. Last not least, we are adhering to a conservative financial debt profile and medium-term dividend payout guidance. And with that, I'm happy to hand back to Oliver for an outlook on expected key orders and priorities in 2026.

Thank you, Christian. Now let me turn to 2026 and the order environment we see ahead of us. As in 2025, both segments are expected to contribute meaningfully to order intake, and the momentum is broad-based rather than concentrated. In the Sensors segment, core programs such as TRML-4D air defense radars and the Eurofighter platform remain firmly embedded in national procurement plans. These are not cyclical projects. They are structural pillars of European capability expansion. We also anticipate the complementary procurement for Pegasus, which would further strengthen our position in airborne ISR and signal intelligence. In addition, we are seeing clear momentum in land-based electromagnetic warfare. The Knifefish program in the Netherlands and further European customers illustrate that electromagnetic spectrum capabilities are gaining priority across European armed forces.

And then there is luWES, airborne electromagnetic standoff capability. We consider ourselves very well positioned in this program. Depending on customer requirements and subject to the outcome of competitive tendering, luWES has the potential to become a true game changer for Hensoldt. The possible order range spans from multi-hundred million euros to in certain scenarios, billion levels. This would be a logical expansion of our electromagnetic warfare expertise and our ability to integrate complex airborne systems at scale. Turning to the Optronics segment, 2026 has already started with strong momentum. The Schakal program is already in our books and further land system-related contracts are expected as platform modernization continues.

As in 2025, demand combines new procurement with capability upgrades and self-protection enhancements. Taken together, the 2026 order environment confirms the structural nature of the growth dynamics we described earlier. It underpins our guidance and provides visibility across both segments. In other words, 2025 was not an isolated peak. It was a starting point of a part of a broader and sustained capability expansion cycle.

Let me give you some color on how we are translating this momentum into execution discipline. We are very clear about what the next phase requires. The structural growth dynamic creates opportunity, but it also increases complexity. Scaling production, integrating software architectures, managing supply chains and maintaining delivery reliability at the same time is demanding. That is why we have defined clear priorities for 2026. The central axis remains deliver at scale, industrialization, supply chain stability, engineering discipline and production ramp-up are at the core of our attention. In a market environment like the current one, credibility is built through delivery. We are fully aware of that.

At the same time, we continue to scale software-defined defense, MDOcore and our multi-domain architectures are moving from positioning to operational deployment. Partnerships are being translated into executable programs. Grow with focus remains selective and disciplined. We expand where we have technological relevance and structural demand, not opportunistically. And finally, we are investing in organizational effectiveness. The scale of our growth requires clarity in governance, faster decision-making and empowerment in leadership. These priorities are not abstract management slogan. We presented them to the entire organization in our recent first global town hall meeting where we reached almost 5,000 colleagues and the feedback was strong.

This is a clear understanding internally that the next phase is about disciplined execution and operational excellence. In short, we know what needs to be done and the organization is aligned and behind it. Before we conclude, let me briefly address leadership continuity and evolution. On May 1, Inka Tews will join Hensoldt as member of the Management Board and our new Chief Human Resource Officer. She brings extensive experience in guiding organizations through transformation and growth phases. As we continue to scale industrially and organizationally, strong leadership in people development, governance and execution becomes even more critical. We are very much looking forward to working with her in this next phase.

And yesterday, on 25th February, we announced that the Supervisory Board has extended my contract until the end of 2031. This extension provides continuity as we execute our long-term strategy and manage the current scaling phase. It reflects a shared commitment to stability, disciplined growth and consistent implementation of the strategic path that we have identified. Continuity and evolution go hand-in-hand. We are strengthening the organization while maintaining strategic consistency, ensuring that Hensoldt remains focused, resilient and execution-driven in the most dynamic market environment.

Ladies and gentlemen, let me conclude by bringing the key points together. 2025 was a year of execution and confirmation. We achieved a record order backlog, which provides high visibility for the years ahead. Revenue development is on track, demonstrating that we are converting backlog into delivery. Profitability remains strong with adjusted EBITDA having increased significantly year-on-year. At the same time, we generated outstanding cash flow, strengthening our financial resilience and supporting disciplined expansion. Operationally, we continue to expand and modernize our industrial footprint, increasing capacity, stabilizing supply chains and preparing the organization for sustained scaling.

And our strategic transformation under the North Star framework is clearly on track with measurable impact across the company. Looking ahead, the outlook remains robust. Our new strategic partnerships are accelerating innovation and strengthening our ramp-up capability. They demonstrate that Hensoldt is deliberately positioning itself as a bridge builder across the defense ecosystem, connecting agile start-ups, sovereign digital infrastructure providers and next-generation system primes. In this architecture-driven environment, integration becomes the decisive capability. We are evolving beyond a traditional sensor house champion into what I described as a neo system house, a multi-domain integrator built around data, software and smart and connected sensors, providing electromagnetic spectrum superiority.

This positioning broadens our relevance in future programs and strengthens our competitive resilience. At the same time, we see a multitude of major contracts expected in 2026. And we are confident that a strong order intake level can be sustained. What we are experiencing is not a cyclical volatility. It is structural growth driven by funded procurement decisions, multiyear force planning and lasting shift in European defense policy. In this environment, we remain a reliable partner for our customers, delivering at scale while shaping sustainable growth, both industrially and organizationally. Hensoldt is scaling with discipline, expanding with purpose and positioning itself at the center of Europe's evolving defense architecture. That is the foundation on which we build the next phase of our development. Thank you very much, and we are now happy to take your questions.

[Operator Instructions] The first question comes from the line of Sebastian Growe from BNP Paribas.

The first one would be around free cash flow. And apparently, you ended the year about EUR 100 million higher compared to your earlier guidance, and that was largely working capital driven. So I was wondering how we should think about the building blocks behind the about EUR 200 million free cash flow target for this year, i.e. '26. And on the structural note, are you seeing any structural improvements really for working capital at this stage? If you could start there, and then I would have 2 more around the industrial footprint and the order pipeline.

Sebastian, thanks for your question. Yes, you are right. I think there were 2 aspects in 2025. First, we -- from my point of view, did a proper working capital management. But on the other hand, we clearly increased advanced payments. So we were fighting now 3 to 4 years to get this structurally done. So this is now the case. So when I look in terms of figures, we have approximately 18% out of order intake, we receive advanced payments on average on the group. And this is also a figure we now go ahead, which is then substantially higher than in the last years, and this helps us, of course, to balance the working capital requirements on the one hand, but also on the other hand, the CapEx required for our investments.

So going forward, 2026, we will see a similar percentage of advanced payments compared to order intake. You see that the book-to-bill guidance 1.5 to 2 is relatively broad. There are 1 or 2 tickets in where we have to see. But another building block is, of course, that we will have a high CapEx number this year, approximately 6% of revenues. And this is very heavily depending on the new production site, which is then go live beginning of 2027 and including the new repair line for ground-based systems. And this in total makes EUR 80 million on top CapEx when we compare the figure to 2025. And the rest, I would say, in terms of interest, we are a little bit better now to the new refunding. So the structure is more or less corresponding with 2025. But of course, the additional CapEx for infrastructure has the impact on the 40% conversion.

Right. And then talking about CapEx, you mentioned industrial footprint before. You have also alluding to be evaluating further site expansions. And I do remember also that you pointed to a CapEx reserve of 1.2%, 1.5% of sales for further expansion projects. And apparently, orders are continuing to as well. So can you remind us by when you will have to take a decision here? And can you also share with us an update whether your priorities might have changed with regard to going for own plans as opposed to more partnering M&A or outsourcing?

Yes. First of all, the reserve and the approach we outlined in the Capital Market Day is still the same. So the figures are stable in this regard. What I can say that we are very close in terms of decisions for ground-based systems. You know that our new site in Oberkochen is now already -- almost finished. But with the increased demand in services and availability of systems, we have to have a solution here. So we are quite close and we'll, of course, update you as soon we have taken a decision for services.

Next thing will be that we, of course, have to elaborate on having another or an expansion in infantry sites, which is done in Wetzlar. Also here, we have to do some investments, but this will be well covered in the CapEx plan we have outlined. And these are, I would say, the next 2 ones, and then we are well prepared for the next 3 to 4 years. So this is valid. And in terms of how do we structure it, on the one hand, we have our real estate company who has done many of the investments in Oberkochen and other real estate investments. Going forward, if there will be a new -- a big program for Ulm refurbishment, then this real estate company will do it and we rent it back from the HV perspective.

On the other hand, I'm clearly in favor currently that we partner with a project developer in terms of real estate. There are many, many companies out there who are very professional in this regard and are able in weeks or months to ramp up a real estate and then we will rent it from them because our cash should go to our business model, developing our radars, our optronics and investing in software defense.

And maybe there was one aspect in the question as well. It's very clear that this organic scaling, which Christian in principle alluded to, goes hand-in-hand with what I would see as smart scaling. And that is still, we have many options under discussions where, of course, on one hand, we reduce our own work share in outsourcing, bringing more resilience to the supply chain up to partnering and including partnering where we would also consider a build-to-print view for rather lower complexity products. So that is all part of a comprehensive plan that we are currently putting in place.

Okay. And then what have you, on luWES, you mentioned Oliver that, that might be a multi-hundred million, if not an opportunity in the billions. Can you just remind us and walk us through the time line here for the project? And how should one think of the mix impact related to the very program, please?

Yes. Maybe I'll start with the project and then the impacts are rather taken by Christian. So well, why are we well positioned for luWES? So luWES has a history of, I would say, more than 5 years where the German government had decided that part of the national sovereign interest in technology, they would invest in electromagnetic warfare capabilities, be it passive, and that's what we see with Pegasus, where actually we can put intelligence on the enemies signal intelligence spectrum. And of course, what we were also developing in this framework was the active electromagnetic capability, means electromagnetic combat where we have the ability to jam or at least interfere with the enemies electromagnetic spectrum.

So that's why at the lower end of the luWES program, we see ourselves well positioned, if not set as the contributor of the mission system package, which will, of course, be a significant part of the luWES program. Germany has committed to NATO that they will contribute, I would say, a dozen of jammers to the NATO order of battle. And in that regard, this commitment is about the turn from the 20s to the 30s. So we would expect such capability coming into force around 2030, which puts some pressure on the time line for the program. Last year, in summer, we have demonstrated with a couple of partner companies, our technical capability, which can be considered as a kind of critical design feasibility review. And based on that, the German customer is currently working on the competition where I would see a limited number of players being capable to offer.

So our decision as we go forward, and I cannot give more details on that because that is a competitive or rather close competitive tender that is ahead. But the question depends, could we go further because we have all the experience from Pegasus. Could we not just offer the mission package as the mission package is the formative element of the capability that is about to be built. It could be that we take the full responsibility as a prime or in a partnership with some system integrators on the market, and that will drive the volume that actually comes into our books. So it's definitely a program as we have announced it here for this year, where we will see the tender. If it comes into force this year or early next year, that depends also on buying [indiscernible] and how the process proceeds. But again, with the commitment to NATO, which is clearly made until the early 2030s, the pressure is very high to start this program as quickly as possible.

Maybe to add on that, Sebastian, because you asked when we stay with the mission package, as Oliver has elaborated, then we talk about the figures we have now cited, and this is also included in our plan. If we go beyond, then figures will be significantly higher. This will also have a positive impact to our plan. But I think we're in a very early stage in this regard. So -- but we will keep you updated.

If I may just quickly come back to the mix aspect in the sense of at least indicationally providing some color around how we think about eventually the margins because Pegasus eventually we have some memory, which is different to the group margin. So if you could just qualify that.

Yes, sure. So we have 2 segments, and we have seen 2025 with 19.2% in sensors and around 14% in optronics. So for this year, I see approximately a similar margin in sensors, especially because we have now the invests and the costs for the new production side. Of course, we will have upside in volume, but encountered by the invest. And in optronics, I see a 2% improvement going ahead, going along with the revenue increase. So this, from my point of view, is the margin picture for 2026 for Sensors and Optronics.

My question was more related to luWES, if there's any sort of indication that you can drive.

I think in luWES, it depends how it's structured. Is it pass-through? Is it -- I think in general, for the payload and a little bit beyond, it will be similar to our used margins. It will be clearly better than in Pegasus. So this is for sure the case. If we go beyond, I think it's still too early to envisage on that, but we will not go for a program where we do not earn money. That's for sure.

The next question comes from the line of Marco Vitale from Mediobanca.

I have a couple. First one is on the potential, say, progression in top line growth that you expect for 2026. I mean you guided for a 10% increase, and we noted -- say that in 2025, the top line growth, progression was sort of front-end loaded. Should we expect now that the, say, comparison base gets tougher going ahead, a back-end loaded profile also for 2026? And then second question is still on the underlying assumption for your guidance. what are the assumption for the FCAS project and underlying your guidance? We heard yesterday from your partner, Indra that they are still committed to deliver on the sensor pillar regardless of any outcome of the project for the aircraft. What are your target about that? And what is included to your assumption?

Thanks for your question. So first of all, the question on top line, I think the top line guidance is, from my point of view, very realistic. The good news is that all the orders we assumed in Q4 came in. So it's now on us to execute on them. We have 2 major complexity points out. That means the logistics center, which has clearly stabilized and the move to the new site, there are -- there were 2 cornerstones where we managed quite well despite they had a minor impact on revenue. But these are out and now we -- it's on us to stabilize. And this is why I see that this is very realistic to -- for our revenue guidance.

So this is in total the topic. And of course, it will be -- it will depend on ramping up of ground-based systems, periscope, MAWS, TRML-4D for sure, then the first batch of Spexer for the Skyranger. I think these are the major building blocks. And a part of that, of course, Luchs 2 is now one of our key programs where we develop the suit. And these are the main building blocks. But as I said before, I'm very confident on the guidance for 2026 because we have now many, many peripheral sites in place.

Yes. On FCAS, a couple of comments. So in principle, this, of course, is a political decision. And we are currently making very clear that we need that clarity now. We have about 200 highly experienced engineers supporting the program as well as some national activities that are around FCAS. So in that regard, it's important for us to see how would we work with those people in the future. Looking at what we would do in the future, we, of course, remain committed, and I have also discussed with our colleagues from Indra during the Munich Security Conference. So we remain committed to contribute to FCAS in whatever shape or form FCAS would look like.

But according to also our claim to be strongly platform independent, we as Hensoldt also say we are also open to contribute to any alternative path that might arise for the future. And here, I would see from the Hensoldt perspective that any realignment on FCAS also bears opportunity. It bears opportunity because with our current posture, we cannot only contribute on the sensor pillar, but we will also contribute to what I see as the -- also driven by the market dynamics at the moment, with is the capability driving element. And that's a system of system part, which is also called CFSN, so the nucleus of a system of system capability architecture where, of course, with our multi-domain core and our sensors, we can play a major role.

That is what also the cooperation with Helsing that we have announced is about where we will develop our sensors and contribute these rather collaborative combat elements to the combat drone, the 4 tons combat drone CA1, which, of course, would be part of such system of system. And on a broader term, and I think that is very important to note, we don't see any risk related to such a realignment on our planning assumptions because with a growing business, whatever the future direction would be, I think we have enough work -- qualified work and also quantity of work for those engineers that are applied and whatever direction it will go, I see a most relevant contribution of Hensoldt.

We now have a question from the line of Afonso Osorio from Barclays.

First of all, Oliver, congrats on your new 5-year contract. That's great to see. I have 3 questions, if I can. You already touched on some of these anyway, but I'll ask anyway. First one is on your current ramp-up in your capacity plans. Can you perhaps expand a little bit on your supply chain situation in terms of the bottlenecks you're currently seeing, if there are any? And within that, also trying to understand if you have any need for incremental CapEx this year and next year, at least versus what you said to us in November to arrive to the planned production volumes.

So that's the first one. Second one is based on the latest news flow from the German budget and demand situation there. Given the news flow on possible delays or no delays, curious to hear your thoughts on that based on everything you just said, I'm assuming that everything remains intact, but just wanted to double check on that front. And then finally, if I can squeeze one more. it would be great to see your thoughts on the opportunity in the drone market. I mean you have the Slide 8, where you already talked about a little bit on that part. But I appreciate the exposure to drone is quite small for you today, but any thoughts on the tangible revenue opportunity on the drone side, that would be super helpful.

Thank you. Then I'll take the first question regarding supply chain. Yes, I think as we elaborated in the Capital Market Day, the downside is that we cannot just put on a button and it runs. The good thing, I think, is that we have a clear perspective what are now the challenges. And currently, I do not see, I would say, a major blocking point. I think the major challenge in this business is to manage the complexity, beginning with our infrastructure, beginning with our own production and then having seamless communication with the suppliers, with the supply chain quality and ramping up in an orchestrated way.

And the orchestration of the whole supply chain is the challenge, but there is no one challenge where I could say, okay, we have to solve this and this, and then we are fine. But we also show, I think that we can manage it. So when I just compare the material throughput, and we had a proper discussion yesterday in Ulm from a pure material throughput, we doubled the material throughput now in 2 years. You cannot see it yet in the revenues because also the mixture between material and personnel expenses has changed, but it shows that with our measures we have taken and laid up in the Operations 2.0, we clearly pushed the supply chain up. So this is my comment regarding supply chain. It's a complex system, which we have to manage. But currently, we have the necessary levers in place.

Okay. So question 2, German budgets. I'm not sure if we understand it well, but we see everything intact. I mean, we underline it also in our pitch. It's structural. We have a long-term plan that the budget will grow to EUR 152 billion by '29. So in that regard, all what we hear and see is really structural growth and a long-term commitment of the German customer.

Okay. And then the last one on the drone side.

Yes, yes. The last one on the drone. I mean, yes, we -- I mean, Hensoldt is really positioning, and that's what I introduced as the neo system prime as a kind of bridge builder because I'm a bit -- I would rather say fed up with the discussion of drones or tanks, drones or fighter airplanes, drones or frigates. I think definitely a defense scenario of our alliance in Germany and Europe -- and that is what we can state upfront would be different than the Ukraine war. However, drones are changing the future war scenario, and that's why Hensoldt positioning as this neo system prime, we are working very closely with the drone supplier.

So I highlighted our cooperations with Tytan, with Helsing and also with Quantum Systems, including that also, as you know, we have invested in Quantum. So all of these cooperations are strategic. We are talking to other drone suppliers, including other domains than air that applies to the land domain where, for example, for the Luchs 2 or also for some of the electromagnetic combat systems, our customers are asking concepts couldn't we have additional UGVs supporting those traditional platforms in penetrating deeper into enemy territory, distributing antennas and sensors across the battlefield. So I think there's a strong dynamics, and that is why we are talking to those companies. What is also very clear, as stated before, we will stay platform independent. So none of those companies is in any shape or form exclusive.

So we try to deliver to the breadth of those platforms. And we are evaluating, I would say, in 2 directions. The first one is the role of a system integrator where we see a strong necessity that especially looking at intelligence surveillance reconnaissance, the sensors of this drone cloud, as I would call it, are seamlessly integrated into broader defense architectures, be it air defense, be it counter UAS, be it ISR, signal intelligence, electromagnetic warfare or whatever. So it's our clear self-taken task, and we have a strong backup from the customer that we put the 2 worlds together in a sense of a seamless ISR infrastructure supporting information superiority decision speed and especially precision engagements.

So that is one element where MDO core and our general ability as system integrator comes into place. And the second thing is, of course, our sensors, not the breadth of the sensors, but looking at the preciser, looking at some of the optics, we will evolute our portfolio in the range of drones. That is not to say that we go into the commodity market of the smaller drones, but having like midsized unmanned ground vehicles, having like mid- to bigger size unmanned aerial vehicles as we do with CA1 with Helsing, we sure have an ability to provide sensors to this segment. And that is, of course, driving also quantities. So I think drones changes our business, and we're anticipating that in both in quantitative growth, but as well as in moving the quality and evaluating also the business model of the company.

The next question comes from the line of Chloe Lemarie from Jefferies.

Most of mine have been answered, but I'll have a follow-up on -- so first of all, on the comments that you made with regards to the Sebastian question on free cash flow. On the advanced payments, should we take the EUR 344 million contract balances as kind of a guide, which is equal to about 7% of your order intake? Is that the right ballpark for 2026? And then second question on the 2026 order intake, the range is quite large. So I was wondering how much of that EUR 4.1 billion, EUR 5.5 billion guidance are you expecting to come from Germany? And what would be kind of any large order that you see potentially slipping to 2027 to explain that range?

Thank you for your question. I think when you want to have a calculation of the pure advanced payments volume, then you should take our order intake, multiply it with an 18% and then you will see that the advanced payment figure on that. So here, we have growth also in line with our order intake and our revenues. So what drives the range? You have seen that in our expected key orders, there are some very big ones. So we have elaborated on Pegasus, for example, we have elaborated on luWES.

And as such big programs are planned or on our contract, -- it could be that it's contracted in November, December, but it could also be that it slips to January, February. I think during the course of the year, we will be clearer in the book-to-bill guidance. From the current point of view, I can say that everything evolves very, very fast in a very dynamic way. But this is simply the reason why we have chosen now this guidance range. But in case if it's then December or January, February, I think it's not our biggest worries because the order book is very, very full, and we are very busy of exploiting the order intake into revenues.

Understood. And just on the share that you expect from Germany?

Sorry. Yes, I think we have elaborated also in the Capital Market Day that in a long-term perspective, we see 50:30:20. But when I look in the next 2 to 3 years, we should assume 60:25:15, so 60% from Germany, 25% Europe, 15% rest of world. This will be reflected in our order book and also then, of course, reflected in the revenue split in the next 2 to 3 years.

We now have a question from the line of Carlos Iranzo Peris from Bank of America.

On the follow-up order on the Pegasus program, should we expect any meaningful change in terms of pass-through revenues versus the previous order? Or should we kind of expect the same setup?

Carlos, thank you for your question. So if it's the 900, which we have shown in the page, I do not see a split. I think what's currently discussed is what will be the structure. The Germany has some Global 6,000 aircraft in their fleet operating. And now then it will be the question how will be the structure will be given us as a so-called bestellung or will they be bought? And this, of course, then drives the revenue split. And then, of course, it could be that the revenue figure changes a little bit. We will learn, I think, also in this regard more during the year. But if it's the EUR 900 million we have planned for, then the share of pass-through will somehow similar as in the last program.

Okay. Great. Understood. And then if we can speak a bit about your book-to-bill because coming back to the comments that you made in the interim remarks, when you said that you expect a volume of at least EUR 48 billion, but this might not repeat the exceptional peak of 2025. So I just wonder how should we read this in the context of your book-to-bill guidance? Does that mean that you think your book-to-bill can potentially peak in '25, '26? And then should we assume that progressively normalizes from '27 onwards?

Could you please repeat that? I've not catched it. Sorry.

Yes. So like when we think about book-to-bill from 2027 onwards versus what you plan to do in '25 and 2026, how should we think about it? Do you see the book-to-bill peak in '25, '26? Or do you think that those levels can be sustained going forward?

Okay. Now Carlos, understood. So I think that the order intake will be substantially higher in the outpacing years. Why? Because the German defense budget will grow heavily in the next years, not only marginally, but structurally to EUR 160 billion in 2009, now coming from a figure slightly beyond EUR 100 billion this year. And this will, at the end of the day, be reflected in our order book. So I do not see that this will be the peak. There is more to come in the next years. And we will also see we have guided for EUR 6 billion in 2030. That means order book will increase simply to our revenue structure across the years.

Plus what we need to consider here is the international customers. I mean once we have scaled our capacity, which is on its way, I mean, just coming back from 2 big exhibitions in Riyadh as well as Singapore, I mean, one thing is for clear, the technology we deliver would sell on an international market. So it depends on our focused approach as well on the capacity. So in that regard, I'm very confident about future order intakes.

The next question comes from the line of Christophe Menard from Deutsche Bank.

Just one question on the margin guidance. You used to guide to a 50 bps increment, which I mean, is, to some extent, you're getting to the same level. But still in 2026, you may have a slightly lower margin increment, if I take your range. What has driven you to do -- I mean, such a range? I mean what is the potential headwind, I would say, that you may see in '26 to -- not to just simply guide to 18.9%.

The second question was on the partnerships, very interesting. What forms will they take? Do you plan to have joint ventures? Or is it really kind of a supplier to client relationship? Or is it purely a collaboration? And the financial contribution of those partnerships, I would guess they are in your guidance. And do you expect to have more of these partnerships? Do you need more of those partnerships going forward? And the last question is on IRIS-T SL MX, apparently the latest evolution. Is it something that will require a new radar development on your side? Or is it already developed and already in your -- I mean, it has been kind of spent in terms of R&D?

Thanks, Christophe, for your margin question. I'm happy to take it. So first of all, while we have guided for a range, we have seen in the last 1 to 2 years that we always have, I would say, a slight or smart start into the year with lower margins because costs are in a linear perspective, whilst our business is still very, very heavily Q4 related. And you will see that in the first 1 or 2 quarters, normally, margins are under pressure because we take normal costs on board, we need them in order to have capacity. And then the margin turns out in November, December. And this makes the exact margin guidance relatively, I would say, to be very precise, it's difficult.

But in the range, I feel quite comfortable. And you have seen in the last 2 to 3 years that we were always at the upper end and even beyond in the margin. So I'm very -- yes, also in this regard, I'm very convinced that we can also reach the 19%. But now let's stay with the guidance. I think this is one aspect. Another thing is that when -- especially when we talk about air defense and the current situation in the Ukraine and our TRML-4D, there are sometimes decisions during the year that we prepone the one or the other radar for our customers, and they have a slightly different margin profile. And of course, we will always work together with our closest partners, the German government to have the radars there where needed. But this implies then a little different margin perspective, which has an impact then on the bottom line.

Okay. To the other questions, Christophe, partnerships, I think that varies. The current status is indeed the partnerships are strategic. They are collaborative. And at that stage, it's supply in both directions. We would supply components, be it sensors, be it interfaces to the partners as well as we would get their supply, example, given Tytan on a counter UAV drone that is embedded into our Elysion system. I mean, looking into the future, we are open in, of course, extending that to a stronger tie which depends then, I mean, especially looking at Schwarz Digits. Once we have a larger program coming out, then, of course, program to program, we have to consider also from financial aspects, we had the question on luWES, what would be the best setup, the industrial setup to support also the financial, the risk sharing, the work sharing and all of that, where in the end, we definitely are open also in structures of JVs and putting things together.

But that is what I would say rather in the future. As you know from past discussions, I'm a strong fend that such industrial constructs are means to an end. So at the moment, we're really focusing on the end, bringing the topics of the companies together to the benefit of our customer. Do we need more partners? I mean, clear conviction from my side, nobody can do it alone. We need more partnerships at the moment. So we have an MOU with SAP in place, which we discussed last year at the Munich Security Conference, which was primarily aiming at the electromagnetic combat element of the Eurofighter.

So we have revisited that on management level at the MSC this year. We have recently signed an MOU with Kongsberg on the space constellation. In that regard, especially looking into the Nordics, there are strong G2G agendas. And whenever a G2G agenda would need a strong partnership on industrial level, we are open to discuss. And as a matter of fact, I'm in a very frequent dialogue with most of the CEOs here in looking at the traditional defense players. But also partnerships with -- and I won't elaborate too much anymore on supply chain and so on, where we have, at the moment, strong discussions with automotive suppliers, be it that we take personal, be it that we use their capacity in production, extending our supply chain and so on.

So partnering indeed is a very strong element, and I would rather conclude you can't have enough partners in order to cope with the dynamics and the growth that we see ahead of us. And the last thing, IRIS-T SLX. Yes, there will be adaptations on software level, but it's software-defined radar. So in that regard, I would consider this as evolutionary, not disruptive in that sense. Also considering the fact that we have a strategic partnership with Diehl. Helmut Rauch and I meet on a very regular basis. We have established governance to discuss the way forward.

That is about integrating. And also you see our MOU that Helmut -- that Diehl and Hensoldt have signed during the Paris Air Show last year, where we want to improve the surveillance and reconnaissance elements where we would connect the radars of the IRIS-T SLM also with the broader air surveillance where Hensoldt has many radars in place, integrating the passive radar, also extending, let's say, the ISR network, air defense ISR network to counter UAS, where at the moment, we are in discussions with the German ANSP, DFS as well as with Deutsche Telekom to probably bring things more broader into the German infrastructure.

And also, what you saw is that recently, Diehl has proven that they can shoot a missile also from a German frigate -- in that regard, as you know, we also have our radar on this frigate, which would be adapted to the software stand of the TRML-4D in that regards to support a new air defense capability for the Navy. All of that is in the perimeter of a very strategic discussion with Diehl and that, of course, encompasses the Iris-T SLX as well.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Veronika Endres for any closing remarks.

Yes. Thank you all for listening today. And as always, should you have any further questions, the IR team is around all day to follow up. With that, have a great day. Thank you, and goodbye.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

Yes. Good afternoon, everybody, and welcome to Hensoldt's Capital Markets Day 2025. Thank you all for coming to Ulm today. And this year, this room is really packed. And I can see there are many on the webcast as well. So great to have you all here.

My name is Veronika Endres, Head of Investor Relations at Hensoldt, and I will guide you through this event today. With me are Oliver Dorre, our CEO; and Christian Ladurner, our CFO. Klaus Emmis, our CHRO, unfortunately, can't join us today, but he send us his regards.

Before we begin, let's have a brief look at today's agenda. We will start with Oliver, who will open the day with an update how Hensoldt is mastering the defense super cycle. Then we will dive into the 4 axis of our North Star strategy, deliver at scale, which Christian will take you through; Pioneer software-defined defense and grow with focus, both elaborated by Oliver and then lead our teams into the future, which is presented by Oliver as well. After that, Christian will provide a detailed update on our financial outlook and performance before Oliver will come back on stage for his closing remarks.

We plan a short 15-minute coffee break at around 2 -- 2:15 p.m. And at the end of the session, we will, of course, open the floor for your questions, both here inside the room and all who participate virtually. And now one final closing remark from my side. Please note that this event will be recorded. A video will be available on our website shortly after.

And with that, over to you, Oliver.

Well, thank you very much, Veronika, and really great to have you all here in Ulm. Dear investors in Hensoldt, dear analysts, ladies and gentlemen, a very, very warm welcome from my side to our 2025 Capital Markets Day. It is my second CMD and my first one here in the beautiful city of Ulm, the very heart of our operations. Thank you very much for joining us today.

Before we dive into strategy and performance, allow me to start with a broader reflection because since last CMD, the world around us has changed once again and fundamentally. The American strategic reorientation toward Pacific has become tangible. I witnessed it firsthand, starting with JD. Van's speech at the Munich Security Conference and most recently, through the announcements that the U.S. will reduce its presence in Eastern Europe, particularly in Romania. At the same time, here in Europe, Germany has formed a new and most decisive government. The dead break for defense spending has effectively been removed and Germany and many of our allies have now committed to spending 3.5% of their GDP on defense. In short, Europe will be ready soon.

Yet when I speak with our customers, the armed forces, the operators, the people who stand and watch every night, I sense two things: optimism and concern. Optimism because the political will and the budgets are finally there, but concern because the threat is immediate. Russian drone activities, airspace violations, hybrid attacks and all of these have increased exponentially. Our customers are not preparing for 2030. They are thinking about tonight, about 2026 to 2028, the critical years before the buildup fully takes effect. That's why we have adopted their language, a simple but powerful operational mindset, fight tonight, support our customers with maximum readiness by making the best use of existing systems and improving them through software and data; fight tomorrow, deliver at scale, providing the next generation of interconnected multi-domain capabilities. This dual mission supporting readiness today while building strength for tomorrow defines what we, what Hensoldt does.

There's another aspect of this reality we must recognize. Operational security matters. Russian Espionage activities are real, including the collection of intelligence on industrial sites and production capabilities. We ask for your understanding that going forward, we will be more careful about what we share publicly, fewer details about facility locations, production numbers or unit references. We have the duty to protect our people and our customers, and we take that responsibility very serious. That said, we will still show as much as possible. And during today's site tour, you have seen for yourself how much progress we have made.

With that context in mind, the changing world, the immediate threat and our growing responsibility, let me turn to Hensoldt's own journey because the past year has been very busy, demanding and extraordinarily productive. Last year, we presented to you our North Star strategy, a comprehensive framework for growth, innovation and leadership. Since then, we have delivered and the Hensoldt investment case has become even stronger. Today, our story is clearer and as said, stronger than ever. Hensoldt continues to benefit from a step change in market growth, especially in Germany and across Europe. We are Germany's defense and electronics champion with the German government as anchor shareholder and a very strong political support. We are technology and innovation leader with software-defined defense and our multi-domain operations software backbone called MDOCore, paving the way not only for the fight to night, but for long-term competitiveness. And we are multi-domain defense player, serving all branches of armed forces with smart software-enabled interconnected sensors. Exactly 334 days after our last CMD, we are not only giving you an update, we have entered a new era of our business.

Let's take a closer look at how our ambition translates into growth. Since introducing North Star, growth formula last year, we have refined our approach and raised our target from EUR 5 billion to EUR 6 billion by 2030. That means we are committed to doubling our revenues at an accelerated rate, but doing so sustainably with efficiency, resilience and profitability. This is not about chasing numbers. It's about building a scalable sovereign and sustainable growth engine.

Before we start, let's quickly revisit the North Star structure now reordered to reflect what the past has taught us. You've all seen this picture before, but let me briefly recap. At the foundation is deliver at scale, building a scalable, resilient and efficient industrial base for European security. That is where we create the operational backbone of our Hensoldt 2.0.

Next is pioneer software-defined defense, our strategic ambition and future differentiator. With MDOCore, we now have a clear right to win as the integrator of multi-domain data-enabled solutions. Third, grow with focus. Our commitment to expand internationally strategically and sustainably beyond Germany and Europe, our strategic regions, the United States, Canada, the Middle East, India, APAC and Australia play a central role here. And finally, lead our teams into the future because none of this happens without people. We have become a unique employer of choice with a motivated and rapidly growing team. Together, these 4 axis from North Star, the framework that guides us towards sustainable growth and European technological sovereignty.

So what progress have we made in just under 1 year? Let's jointly take a look. The progress across the company has been impressive and inspiring so many hands, so many minds working in concert toward one goal. Operationally, we have made decisive progress. Our new logistics center is live. The new Optronics campus is coming online, and we have launched Operations 2.0, a key milestone we will return to later today. Strategically, we have established a dedicated SDD organization, signed key partnerships and were selected for major software-defined programs, including the new reconnaissance vehicle, Luchs 2.

Internationally, we have formulated regional strategies, introduced key account management for our most important customers and refocused our international organization. Culturally, we have launched our evolution initiative to strengthen leadership and collaboration, and we have welcomed over 1,000 new Hensolians to the team. That is, to our understanding, transformation at scale, operational, strategic and human. With a strong foundation in place, it's time to look outward at the world that surrounds us and the opportunities it presents because the super cycle we anticipated last year is no longer a forecast. It's happening right now. So let's turn to the environment that will define our next decade of growth and see how Hensoldt is seizing the second chapter of the

Ladies and gentlemen, when we met in London last year, we spoke about the world entering a turning point defined by instability, strategic competition and the return of hard security. A year later, we can say it clearly, the super cycle has arrived. The drivers are geopolitical. They are structural, and they will shape our business for the next decade and beyond. Let me start by taking a step back and look at what has changed in the global security environment since our last Capital Market Day.

The now almost 4-year long war in Ukraine and the Russian threat to Europe's Eastern flank have only grown more acute. News of Russian airspace incursions, drone activity near European military sites and hybrid operations have become almost daily occurrences. At the same time, the situation in the Middle East remains tense. Even though the release of hostages from Gaza brought relief, tensions are far from easing. The continue to disrupt maritime traffic in the Red Sea and the civil war in Sudan is intensifying. In Asia, we have again seen major clashes between India and Pakistan, both on the ground and in the air. Meanwhile, China is ramping up military pressure on Taiwan and against neighboring states in the South China Sea.

And as I said last year, and it remains true today, what different is not the crisis that exist, but that they are happening all at once and at accelerating speed. Let me be very clear. The threat to Europe from Russia is real. This will define the mission of European armed forces for the foreseeable future, and therefore, it defines our mission, too. But amid all these challenges, I remain confident because what we are seeing today is not paralysis. It's a real political and industrial awakening.

We can now clearly see the defense super cycle is becoming a reality. Last year, we faced deep uncertainty in Germany. The coalition had collapsed, spending decisions were frozen and the was being absorbed by urgent replacement programs. Today, the picture has changed completely. We have a decisive new government, continuity in the defense ministry and crucially, the dead break has been lifted for defense spending. Germany has fully committed to 3.5% of the GDP for defense and has already integrated it into its multiyear planning. This translates into a defense spending of more than EUR 150 billion in 2029. The order ramp-up is tangible. We see it in our own order book every month.

Across Europe, Capitals are following suit. Many have now committed to the same 3.5% target. And at the European level, the Readiness 2030 initiative has been launched with also EUR 115 billion in loans already allocated to strengthen defense capabilities across the member states.

The most recent NATO summit confirmed what we have long anticipated, plans for up to 50 additional brigades, enhanced airborne and maritime capabilities and major new investments in reconnaissance and deterrence. Last year, we said, for the first time in decades, we see a broad political consensus to reconstitute a credible European defense and deterrence capability. This year, this consensus is turning into concrete action, signed contracts and already delivered equipment. Some argue that peace in Ukraine might ease tensions. Ladies and gentlemen, this view from my perspective, formally just recently traveled to Ukraine, that view is mistaken.

An end of hostilities would simply free Russian forces to shift their focus elsewhere towards our Eastern allies. The demand for air defense, sensors, self-protection will continue to rise and not just this year, but well into the 2030s. A key driver of this transformation is Germany. taking for the first time, full responsibility for Europe security. It does so through major equipment procurements and also by deepening cooperation with its European partners, for example, through the European Sky Shield initiative.

One of the most significant and long overdue developments is that Germany has stepped up. This, we call it Zeitenwende 2.0 was symbolized by 2 decisive moments in May this year. First, when Chancellor Fredriich Merz declared Germany's ambition to build the strongest conventional army in Europe. And second, during mustering tank Brigade 45 in Lithuania when he stated the protection of Vilnius is the protection of Berlin. These are not symbolic words. Since May, we have seen them turn into policy, turn into budgets and recently turning into orders. Imagine this only a few years ago, even 1 year ago, what a change in mindset and what a change in responsibility. For Germany, we now see a clear path to 3.5% defense spending by 2029. For the rest of Europe, at least 2.5% by 2030. In contrast, U.S. defense spending is expected to remain largely constant relative to the GDP. For Hensoldt, this means opportunity and obligation.

As Germany leads, we are ideally positioned to capture this growth reflected in our strong order backlog and the orders still to come before year-end and into early 2026. This renewed sense of purpose isn't just rhetoric. Germany is matching its ambition with real reform and money. The political commitments we've heard being backed by concrete action. The planning and procurement acceleration law has been enacted, cutting bureaucracy and speeding up every stage of the procurement process. The BN BW, Germany's Defense Procurement Agency has expanded its capacity significantly with over 150 parliamentary proposals expected to reach approval by the end of 2026.

The Chancellary, Ministry of Defense and Ministry of Economic Affairs and Energy have all created new structures to strengthen the defense industry. Of the known budget requests, almost all are destined for German industry. For Hensoldt, this means we have earned and will continue to hold a unique position as the national sensors champion and the partner of choice for the Bundeswehr. And I can tell you from experience, I spent a great deal of time in dialogue with political stakeholders across party lines in Berlin, Brussels and beyond. The picture is clear. Hensoldt enjoys strong political support based on trust, competence and reliability. This political momentum translates direct into market dynamics, especially in our core domain, defense electronics.

We are witnessing a major increase in our accessible markets compared to our expectations last year. Germany is again leading the way with growth rates in defense electronics doubling compared to last year. Europe and international markets are following with strong momentum. 4 factors are driving this growth. One, acceleration of procurement programs, especially in the land domain with examples like Luchs 2 and Schakal. Two, a step change in electronic density on all platforms with sensors and connectivity becoming central to future operations. Three, lessons from Ukraine, showing the need to operationalize connected sensor networks in real time; and four, the launch of next-generation capabilities across all domains, air, land, sea, cyber and space. To realize this potential, software-defined defense will play a crucial role with MDOCore enabling us to harness sensor density and data availability and adapt to new operational imperatives quickly.

All of this confirms that Hensoldt is ideally positioned in the German and European defense electronics market, a market with great perspective well into the 2030s. And these market trends are not theoretical. They are already visible in our books today. Since last year, we have increased our order backlog from EUR 6.5 billion to EUR 8.5 billion expected by the end of the year as defense spending, particularly in Germany has just recently taken off and is still gaining momentum. This is just a snapshot in time, and we expect further acceleration in 2026. That reflects both customer trust and our technological leadership. It's not just a number, it's our contribution to security.

Our pipeline has also surged compared to 2022 when we showed you EUR 30 billion, this figure has more than doubled within 3 years. This growth is fueled by the urgent need to refill conventional capabilities, upgrade existing platforms and introduce new battlefield systems, all of which are now transforming into concrete and multiyear contracts.

Let's look more closely at what drives this demand and why Hensoldt is uniquely positioned across all spending priorities. As you may recall, the accessible market in Germany is set to grow by about 20% per year through 2030, with the broader European market following at roughly half that pace around 10%. Behind this are 3 structural drivers, and Hensoldt is present in all of them. First, Procurement of new systems. Customers are buying in larger quantities and at greater speed from Eurofighter to Leopard, Puma, Schakal and Type U212CD submarines. Hensoldt sensor suites are on all of them.

Second, upgrades of existing capabilities from PEGASUS to Sawfish to Knifefish and P8 Poseidon, who has just come to Germany last week, upgrades are essential. As an incumbent with a reputation for reliability, Hensoldt is a natural partner for these programs. And third, development of new capabilities. Our early positioning on LuWES, Luchs 2 and the F127 frigates shows how customer intimacy and know-how translate into future business. And as volumes grow, so does demand for service, training and midlife upgrades. On top of that come accelerating high-margin revenues from our software-defined solutions, including license-based models.

Over time, defense budget will gradually shift from acquisition to operations following the U.S. example, where more than half of industry revenues comes from recurring service and MRO contracts. These drivers are further amplified by a unique feature of a German approach, the focus on framework contracts open to European allies.

The German government strategy of multin-nation framework contracts is proving highly successful. Each one generates multiple follow-on orders first from Germany, then from partners. This is illustrated by the European Sky Shield initiative. The number of member nations has grown to 24 and 7 of them have already signed contracts. Hensoldt has a strong position across all key programs, TRML-4D and IRIS-T SLM currently protecting the Ukrainian skies. Leopard 2A8 with Hensoldt's future sensor -- full sensor suite. SkyRanger with SPEXER radars and Type U212CD submarines with our advanced optronics technology.

Beyond these, Hensoldt is an active member in all major European collaboration programs from Eurofighter to FCAS, and we've seen Tranche 5 confirmed with Turkey joining the program only a few weeks ago. This momentum is already translating into contracts and revenues, many of them booked, others in final slowdown.

Since the start of this year, order intake has been strong, particularly from programs already approved by the Bundesthax Budget Committee. Highlights include over EUR 800 million from the Luchs 2 reconnaissance vehicle based on our software-defined defense architecture. Major follow-on orders for Eurofighter, air defense radars and Leopard/Schakal sensor suites. Orders from TRML-4D with weapon location capability, a tangible example of how software-defined defense improves an already great product through its life cycle. And a new partnership with Boeing for the sustainment of Germany's P8 Poseidon, strengthening our transatlantic ties. Together, these demonstrate our ability to capture both national and international opportunities at scale.

Let me take one of these in a showcase, a program that perfectly embodies the convergence of our strategy and our technology. The Luchs 2 reconnaissance vehicle is a milestone for Hensoldt and for European land defense. The original requirement was 92 vehicles. It has now grown to 274 platforms with potential for even more, both domestically and for partner nations. And for the first time in the land domain, Hensoldt provides not just sensors but a connected sensor suite, powered by software-defined defense. This program is not only a cornerstone of the German Army's modernization, it's a proof point of our transformation from hardware excellence to software-enabled system leadership. It provides long-term recurring revenue through both hardware upgrades and software licenses. And I'll come back to this later when we talk about the full potential of software-defined defense.

Finally, let me address a topic that has become strategically decisive, both for our customers and for Hensoldt, it's counter-UAS. After years of cautious growth, the counter UAV market has shifted into a new dimension. The threat is no longer abstract. Drones are now daily reality in European airspace, not just at the front line. Hensoldt plays a leading role here. Our system integrates own and third-party sensors and effectors into one command and control layer connecting drone defense seamlessly with air defense networks.

We also bring strong electromagnetic warfare capabilities, combining passive radar with jamming to detect and neutralize targets. Our first operational counter-UAS system dates back to 2015 when we protected the G7 Summit here in Germany. And we introduced Azul, Germany's military Counter-UAV system already in 2022. And today, several of our systems are operational with the Bundeswehr and very soon with the Federal Police Service. Through our emerging partnership with German Air Traffic Control, we are also addressing civil critical infrastructure, including airports and urban areas, extending our expertise beyond traditional defense. This, ladies and gentlemen, is a perfect example of how we evolve our portfolio in line with threat scenarios, connecting technology, purpose and protection. And it is the perfect example how we leverage the capabilities acquired through ESG in combination with Hensoldt's Sensors to form a very attractive offering for our customers and create strong synergies.

To sum it up, this is not longer about forecast. The defense market is in full acceleration. Budgets are rising, procurement programs are moving and customer confidence is strong. Hensoldt is ready to harness this momentum with the right capabilities, partnerships and at scale. Let me now show you how we are turning this dynamic into industrial reality because on this scale requires operational excellence, the ability to ramp up, produce and execute with speed and precision.

So with that, let's move from the why to the how, and have a look at first of our North Star pillars, starting with

And Christian, with that, over to you.

Yes. Thank you very much, Oliver, and also a very warm welcome from my side to this day. Yes, indeed, our starting position is excellent and the scale of what lies ahead of us is extraordinary. Market forecasts show that we exceed early expectation with strong visibility from both our backlog and from our pipeline. And we are on the growth trajectory that will continue well beyond 2030.

Let me start what makes the Hensoldt business model fundamentally different, and it is different from that of traditional platform manufacturers. While OEMs build and sell hardware such as aircraft, vehicles or ships, our value lies in what makes those platform intelligent. It is the sensors that perceive the algorithm that interpret and the software that connects everything into a current operational picture. Our systems are platform agnostic by design. They can be integrated across aircraft, ships, vehicles and ground systems, which mean that every new platform program in Europe or beyond becomes a potential opportunity for Hensoldt. And this independence gives us both flexibility on the one hand and resilience on the other.

At the same time, our solutions are highly complex and innovation-driven. They are not one-off projects, but multiyear programs that are built to evolve over decades. Each system starts with development and integration and then generates recurring revenues through upgrades, services and life cycle support. And in short, while the initial ramp-up phase may be demanding, the return profile of our business is fundamentally long term and sustainable. Once established, each program delivers a longer cycle of profitable growth and continues well beyond first delivery. And this is what makes Hensoldt different in scaling from others. We scale intelligence, not metal. We scale capability, not capacity. And by doing so, we capture value over a very much more long-term horizon.

For investors, this means that business that grows steadily compounds value over time and maintain strong visibility and resilience even in volatile markets. And with that foundation, let us have now a look how we are turning this model into tangible operational progress and scaling it across the entire value chain.

So to meet this growing customer demand, we are preparing for a step change in our operations, fundamentally transforming our industrial system to ensure scalability, resilience and efficiency. And our Operations 2.0 strategy is built precisely on these 3 pillars. It's first, scalability, ramping up production to meet increasing demand. Secondly, resilience, strengthening the supply chain and, of course, IT infrastructure to support the ramp-up. And third, efficiency, driving operational excellence and maintaining strict capital discipline. And all this goes, of course, under one guiding principle, ensuring sustainable, profitable and cash-generating growth.

Let's now take a closer look how this transformation starts and how we have already laid the foundation for this next phase of industrial growth. So what you see here that already since beginning of 2022, we anticipated we were expanding production capacity step by step through continuous improvement, automization and targeted outsourcing backed by a straight CapEx plan. And depending on the respective products, our current capacity will take us now through to around 2027 or 2028. I will come to that in detail. But we now are already planning for the next phase, which we call Operations 2.0 to secure delivery capability well into the next decade. And let me highlight the following, and I'm convinced of that, good preparation has always been a Hensoldt strength. So let me show how we've already translated this mindset into new sites and tangible capabilities.

So thanks to our early anticipation, we started implementing footprint expansions and efficiency measures already some time ago. In 2024, as you can see, we moved to our new Wetzlar site, a highly specialized facility for optical sites and optronic devices. This site has not only expanded our production area, but also optimized material flows and processing steps, creating more intelligent and efficient layout. Our new logistics center now provides centralized services for production sites here in Ulm, significantly enhancing both capacity but also process efficiency.

In Oberkochen, we built our new facility through our real estate company. And we are creating a modern synergistic site for Optronics business, enabling more efficient and profitable operations with modular workspaces and smart layouts. And this summer, we have successfully transformed the ground-based business, one of the biggest business in Optronics segment into the new building. The remaining areas will follow now in the upcoming months. And by, yes, Q1, Q2 next year, we will be completely finished this new building.

So with this foundation now in place, the question is, what's next? How do we build on the operations system ready for the next decade of demand? Now looking ahead, we are already evaluating customer needs and resulting capacities requirements on a constant basis, month by month, quarter-by-quarter, year by year. And our mission in Operations 2.0 is to build a scalable, resilient and efficient operation system, one that enables us to respond flexibly to future demand, address strategic challenges but also meet evolving product and service requirements. And now let's have a look what this means in concrete terms, especially for our 2 segments, sensors on the one hand, but optronics on the other.

So as you can see, we have already achieved a remarkable ramp-up in production capacity. And those of you who were joining the site tour here in Ulm have seen this how production has changed. For example, capacity for TRML-4D and SPEXER as well as for sites for armored vehicles has increased up to 8.5x since 2021. But this, as you can see, is only the beginning. Demand, particularly for sites continues to rise sharply, requiring an additional 4.5-fold capacity increase over the next few years. This growth is also driven by higher demand in the service business, especially for the ground-based systems.

As the Bundeswehr expands its circulation reserve in Germany, we say [Foreign Language] or pure availability of system by more than 90%. Fully manufactured sites are being held in stock to ensure immediate availability. By contrast, the radar services focus is more on spare parts, which explains why capacity growth there is less pronounced.

Operations 2.0 target reflects the ambitious trajectory with further expansions planned, especially for air defense radars and ground-based systems, ensuring we can fully deliver on customer requirements and sustain growth well into the next decade. To enable this kind of scale, we are also continuously expanding our physical footprint and strengthening our industrial basis. As mentioned earlier, we've expanded our operational footprint in terms of square meters with sites such as Oberkochen and the new logistics center, as you can see at the slide.

And just a few weeks ago, we have announced that we plan to increase production capacity for air defense radar from 2027 onwards. And at the same time, we are building redundant structures to ensure a robust delivery performance. By 2027, our total operational footprint will have been grown by 3.4x compared to 2023. Further expansions, including a second logistics center, and additional capacity for armored vehicle sites are currently under evaluation, and we will give you some more details as soon as we have it on hand. And beyond that, we are assessing strategic partnerships for suppliers and selective M&A opportunities, vertical integration.

One particularly important element in this expansion is our new dedicated radar production site, the next step in industrializing Hensoldt at scale. So this new radar production site, which you can see here will further strengthen our delivery capability. It will allow us to meet rising demand, especially for air defense radars. Production of even more TRML-4D and SPEXER radars will begin there from 2027 onwards. We are now investing around EUR 80 million in this rented facility, combining resilience on the one hand with synergies across our existing footprint.

Of course, scaling is only as strong as the supply chain behind. And therefore, now let's have also a look at how we are ensuring resilience and reliability along that dimension. As part of Operations 2.0 of this strategy, we are fundamentally strengthening our supply chain to resilience and scalability by continuing to grow. And we are driving improvement across 5 key areas, as you can see here. First, real-time supplier capacity monitoring, followed by targeted orders to secure capacity even on the high demand.

Secondly, long-term security. So we move to multiyear high-volume contracts and material level transparency, deepen our strategic supplier relationships. Third, performance management, mapping, segmenting our supplier landscape to manage strategic partners and supply management and continuous performance. Fourth, geopolitical resilience, local for local, the new data-driven transparency, which identifies vulnerabilities, critical dependencies and allow us to focus on sourcing on Europe for a local-to-local approach.

In Tier 1, we already source 90% of our parts from Germany and 95% in Europe. And this creates, at the end of the day, resilience on the one hand, but sustainability on the other. And last not least, we want to optimize strategic supplier development. Besides using our Hensoldt entities also abroad in other countries, we will focus on more partnerships and on M&A opportunities. Together, these measures will strengthen our supply chain resilience and delivery capability, ensuring that we can meet growing demand efficiently and predictably. However, resilience does not stop at the factory gate. It also means having a digital backbone behind being capable to support this type of scale.

And as we expand our industrial operations, we must also support this growth with a robust future-proof IT infrastructure. And our ambition is to embed resilience across the organization, ensuring every business function that can adapt, respond and perform at scale. We are doing this by increasing flexibility via dynamic resource planning, improving customer service with clean real-time data and enhancing efficiency and compliance through automated audio-ready processes. And our key enabler, and we were elaborating now several times also in Capital Market Day is still our S/4 program. And we have achieved, and you see it here strong progress in this year. So first, we went live with CRM Service Cloud, a new digital customer touch point with real-time information. Secondly, we started CRM Sales Cloud, a fully digitalized global sales pipeline for more transparency. Third, human capital management system went live 1st of July, enabling an integrated digital journey for our expanding workforce. And fourth, extended warehouse management system connected with the new logistics center, ensuring real-time stock and material tracking. And by end of this year, start of the new year, we will go live technically with the new template, laying the foundation for a unified ERP backbone for the entire group, which drives transparency and resilience.

To manage this responsibly also with the new challenges ahead with the new plans of expanding, we are following a hybrid rollout. We calibrated to minimize execution risk as we did also this year. Given the current ramp-ups, we are sequencing rollouts after critical phases to ensure continuity and stability. And in parallel, we are upgrading infrastructure underneath those systems to make sure our IT capacity grows in lockstep with our operations.

Looking now on robustness. We have implemented key resilience measures such as one-off site data replication and network decentralization. We're expanding to high availability of architectures and building the disaster recovery capabilities for mission-critical applications. And our next milestone is here an additional data center, strengthening redundancy while expanding capacity for advanced use cases such as on-premise, AI, data-intensive workload and high-performance computing. Together, these steps ensure that our digital infrastructure scales alongside our industrial footprint. And I'm convinced that without a good digital footprint, you cannot scale. And this will enable us sustainable growth, operational resilience and data-driven decision-making across the enterprise.

And let's now move from systems to execution. And let's be very clear at this stage. We have to manage this ramp-up across the whole value chain. And we have to systematically unlock the efficiency gains to enable scale. And of course, it begins with engineering to make every product designed for manufacturability, balancing cost, quality and time, laying the foundation for an efficient series production. It moves on with sourcing and procurement. The quantities, the things I've elaborated before, stronger volume effects, better pricing and enhanced leverage with suppliers.

It follows with logistics. You can see our rack box automization which are automatic vehicles, streamlining material flow and accuracy in our new logistics center. Factory setup, a dedicated radar production for SPEXER TRML-4D, and we will use tech-based series production decoupled from Ulm to maximize throughput at this stage. And of course, people. We are investing heavily in training and upskilling to prepare employees for new systems and production models, and Oliver will elaborate on this later.

And last not least, production, every step will be optimized with lean methods and new shift models increase and by testing automated test environments, including new test cells for SPEXER and Optimaster automated platform to improve speed and reliability. And those of you who attended the site visit maybe have seen the one or the other automated test chamber.

So these levels are key to now scale efficiently, reducing unit costs and driving long-term profitability. And it's not a single lever that creates the scale but their interaction. The way engineering, sourcing, logistic, production, people and testing reinforce each other. They work by multiplication. If one element fails to perform, the overall effect weakens. And this is why scaling at Hensoldt has to be and will be managed end-to-end -- as an end-to-end discipline. One we have already mastered in the ramp-up of the past 3 years and are now taking our ambition to the next level.

And finally, let's now look at how we manage this transformation with the same financial discipline that defines our company. All our expansion is grounded in disciplined capital allocation. Each project is evaluated for its return profile to ensure that every euro invested contributes to long-term value creation. Our investment approach is backlog driven.

We expand capacity where we have a firm order, a firm customer demand or a very clear visibility. And I think in terms of visibility, Oliver has elaborated that we have a high level at this stage. All major expansion projects are approved and closely monitored by Management Board level, underlining their strategic importance for the company and the governance. Financially, we expect CapEx to rise to around 3% of revenue over the coming years. In addition, we foresee a onetime investment of roughly EUR 80 million in 2026 to support footprint expansion, plus a CapEx buffer of about 1.5% in 2027 and 2028 to accommodate further growth. I will come to that in the finance section.

In summary, we are scaling our industrial and digital infrastructure in a measured financially disciplined way, ensuring that growth remains profitable, cash generating and fully aligned with our long-term strategy. And with that, I want to hand back to you, Oliver, who will outline how our future growth is driven by the next phase of our innovation road map, software-defined defense.

Well, thank you, Christian. When we met at the CMD last year, we spoke about software-defined defense for the first time. At that time, it was still a vision, an idea of how technology could transform defense in a world where threats evolve at digital speed. 12 months later, that vision has become a reality.

Every day, we see how autonomous drones and swarm tactics change the nature of warfare. Protecting people, infrastructure and military assets requires systems that can react instantly and learn and adapt and that grow more capable every time they are used.

Our ELYSION counter-UAS system embodies this principle. ELYSION is modular, already operational with the Bundesware and one of the first systems in Europe that is truly software-defined. New AI models for drone classification can be deployed in hours, not months, sensor networks can be reconfigured on the fly. And by fusing data from multiple domains, ELYSION delivers in real-time AI support and operational picture, providing the information superiority that modern defense demands.

This is what software-defined defense means in practice, systems that never stand still, that continuously evolve and that ensure protection by learning faster than the threat. To understand why this shift is so fundamental, let's take one step back and look at how software-defined defense is becoming the true core of modern warfare.

Modern warfare is a contest of data, speed and decision-making. Every piece of information from radar echoes to infrared signatures or radio emissions originates from sensors across land, air, sea, cyber and space. But the decisive edge no longer lies in individual sensors. It lies in connecting, interpreting and acting on that data faster, faster than anyone else. Software is the enabler that turns raw data into operational superiority. Multi-domain operations depend on connectivity.

Only software makes it possible to link diverse weapon systems at Short notice, exchange data securely and create a unified real-time view of the battlefield. This is what finally delivers the interoperability that armed forces have demanded for decades beyond outdated standards and across domains, in essence, the center of gravity is shifting from hardware that is fixed to software that is flexible, adaptive and continuously upgradable.

That is the paradigm of software-defined defense, and it is exactly where Hensoldt is heading from Europe's leading sensor specialists to a truly software-driven defense solutions leader. Our foundation is unique. Hensoldt is the leading sensor house across all domains, and we understand how data is generated, what it means and how it must be protected.

Now we are extending this strength into the digital space, connecting and fusing our sensor data across platforms and domains. This is how we evolve from a sensor manufacturer into a provider of integrated multi-domain solutions. Our ambition is clear to become the orchestrator of multi-domain operations, the company that enables information dominance through the seamless integration of sensors, software and data. That is our next chapter of leadership.

And we have every reason to be confident in this ambition because we have a clear right to win in software-defined defense. First, we own and understand the data. Our sensors cover every operational domain and decades of system experience give us unique insight into how data behaves in real combat environments. Second, we are independent. Unlike many peers, Hensoldt is platform agnostic and vendor neutral, able to integrate best-of-breed technologies and give our customers true flexibility and sovereignty.

Third, we are sovereign and ITA-free. Our open architectures comply fully with European regulations and scale securely within NATO frameworks and increasingly important differentiator. And fourth, we master complexity. We unite world-class sensor engineering with data fusion and AI expertise, bridging operational and information technology. And finally, we partner smartly. We collaborate where it accelerates innovation with quantum systems in tactical drones or with [ 21 ] strategies in AI, focusing on our strength and complementing them where it creates speed and scale. Together, these capabilities give Hensoldt a decisive competitive edge, our clear right to win in software-defined defense.

This foundation now takes tangible form in a product, the multi-domain operations core or MDO Core. MDO Core is the central integration platform that connects sensors and systems across all domains land, air, sea, space and cyber. It acts as the digital nervous system of tomorrow's network battlefield. It fuses data in real time, generates a shared operational picture and supports the coordinated planning and execution of mission across forces and nations.

The architecture is open by design. Third-party sensors and even full weapon systems can be integrated rapidly into standardized interfaces. It meets NATO interoperability standards and provides ITAR-free backbone for allied operations. Many of the essential building blocks are already in place within Hensoldt from CERETRON and ELYSION to FCAS and Lyncea. We are doing now -- what we are doing now is bridging these elements together within one coherent software architecture, the MDOcore. It serves as a common backbone that enables different systems to communicate, share data and operate as one, turning individual excellence into collective operational power.

The demonstration you saw during today's site tour was the first live instantiation of this architecture, a concrete proof of concept for what MDOcore can do. Within just a few weeks, our engineers connected ELYSION, CERETRON, [ OPTARION ] on the same software backbone, showing how fast interoperability can become a reality. And this is only the beginning. CERETRON is our mission software suite that turns vehicles, ships, aircraft or drones into intelligent reconnaissance nodes.

It connects and fuses sensor data in real time and integrates seamlessly into the MDOcore. We invested a low double-digit million amount in CERETRON's development, and this strategic investment is now paying off. Based on this technology, we secured a major contract for the new Luchs 2 reconnaissance vehicle of the German Army. The initial contract volume is around EUR 850 million, opening a wide range of opportunities in Germany and Europe, leading to roughly EUR 2 billion of potential order intake in the future.

And importantly, the program includes long-term license revenues for CERETRON software upgrades and extensions. So CERETRON is more than a successful product. It is the proof point of our software-defined defense strategy, demonstrating how software investments can create recurring, scalable value and program success at the same time. And CERETRON is not a one-off case. We are already seeing how targeted software investments multiply in value across our portfolio.

Software has become a powerful growth lever for Hensoldt. With relatively small focused R&D investments, we unlock major program revenues, a low double-digit million investment in CERETRON translates into more than 20x that value in program turnover. With ELYSION, a single-digit million investment created over 30x of that amount in orders. The key, ladies and gentlemen, is ownership. Owning the software and the intellectual property gives us control over functionality, security and future upgrades, ensuring that value creation stays within Hensoldt.

In the past, software was a hidden component within a hardware product. Today, it is the defining enabler of capability and increasingly a driver of growth. This marks an evolution of our business model from primarily product-based sales towards a broader recurring and data-driven revenue base. With our smart and connected sensors like TRML-4D, the MDOcore as our backbone for solutions like CERETRON and ELYSION, we are building the foundation for scalable software and database services revenues beyond 2030.

The traditional hardware market will one day reach its natural limits in volume. The future lies in smart and connected sensors that receive continuous software upgrades, keeping platforms relevant and extending their life cycles. At the same time, platforms such as MDRcore enable predictable, recurring license revenues require lifelong software upgrades and data-driven services. This creates resilience and a new quality of customer relationship instead of delivering once, we evolve together.

For our investors, this means a higher share of software and services in our portfolio, stable margins, recurring cash flows and a business model that grows in value over time. And this is not the end of the story. It is the beginning of a new chapter for Hensoldt as a true orchestrator of multi-domain operations. Our path is clear. We combine the deep sensor DNA that defines who we are with the digital intelligence that defines where we are going. Our early investments in software-defined defense have given us a first-mover advantage, as I would call it, we are now scaling up with clear targets over the next 3 years. By 2028, we will have invested a high double-digit million euro amount in R&D dedicated to software-defined defense and core digital platforms. We are building a scalable software and data-centric business with continuous capability upgrades, modular licensing and long-term recurring revenues.

The first contracts are signed. Customer feedback is excellent, and our architecture is ready to scale across domains and across nations. At the same time, we are reinforcing our ecosystem with strategic partners, accelerating integration, adding specialized capabilities and ensuring interoperability across NATO and allied forces. This is how Hensoldt will pioneer software-defined defense by progressively transforming from a hardware specialist into a software-enabled solutions leader. By combining European sovereignty with global competitiveness and by turning data, the most valuable resource of our time into decisive operational advantage.

Ladies and gentlemen, software-defined defense is no longer a vision. It's happening today here at Hensoldt. We have the products, we have the architecture, and we have the momentum to lead this transformation, and we will continue to shape the connected intelligent sovereign defense of the future. So we have seen how software-defined defense is becoming the technological core of our future growth. a transformation that changes how our systems are built, delivered and evolved.

Now let's take a step in the North Star journey and talk about where this growth happens because technology alone is not enough. It's about our commitment to expand globally, but with clarity, discipline and purpose. Growth is not just about doing more. It's about doing the right things in the right markets. Let's begin by looking at our long-term geographic ambition and how we are positioning ourselves to balance immediate opportunities with sustainable strategic reach.

It's fair to say that the massive short-term budget expansions in Europe, especially in Germany will temporarily shift our revenue distribution more towards our home markets. But we are very clear-minded about the long term. Our goal remains 50-30-20, a balance 50% Germany, 30% Europe and 20% strategic regions beyond. Germany will remain our strongest market and strategic base, the place where we develop sovereign solutions for our most important customer and participate in programs that strengthen the Bundeswehr. We deliberately focus on programs open to European allies so that our German innovations can be scaled across Europe. In Europe, beyond our home countries, we concentrate on high opportunity markets in the Nordics, Eastern Europe and, of course, Ukraine. Here, we see strong potential for cross-selling existing Hensoldt products and solutions without developing bespoke systems abroad. p

Beyond Europe, we are focusing on a select number of strategic regions, the U.S., Canada, Australia, APAC, India and the Middle East. We pursue these markets through local partnerships and government-to-government frameworks, leveraging proven products and services.

This approach keeps our footprint focused, our execution lean and our growth scalable in the long term. Of course, such targeted international strategy also need the right structures, clear responsibilities, customer focus and collaboration across the group. Over the past months, we have introduced a new key account management system and adapted our go-to-market approach to support focused growth in our key regions. In Germany, we are establishing strategic account teams for our main customers from the Bundeswehr, B2C to our major OEM partners like Rheinmetall, Airbus and KNDS, B2B. Internationally, we have identified some 30, 40 key accounts across our priority regions. Each one is managed with clear ownership and close alignment between business development, sales and divisions.

Our international sites in France, U.K. and South Africa are also important pillars of this success. In the past 12 months, we have continued to integrate them into our global operating and governance model, leveraging their individual strengths, especially when it comes to deliver at scale. This transformation makes us faster, more customer-centric and better coordinated across markets. It also ensures that every opportunity is pursued with the full strength of the Hensoldt organization behind it. Now while structure and focus matter, what truly brings our strategy to life are our people, our colleagues across the world who represent Hensoldt every day. You will now see a short video with 7 colleagues from around the world sharing insights from their markets and what Hensoldt means to them.

[Presentation]

Yes. We wanted to give you this impression. I have visited in my time with Hensoldt all the sites, and I can just tell you it's really a great team, which I'm very proud of. Every time I meet the teams abroad, I'm reminded of how much diversity, creativity and dedication we have across our global network that has been reflected in the video. These colleagues make Hensoldt more international by the day, and they embody the openness and curiosity that drives our success.

Finally, grow with focus also means expanding our ecosystem through partnerships, innovation and selective M&A. We continue to build on strong network of partnerships to develop new business opportunities and expand market access. You see some of our key partners on the slide from established industrial relationships to new technology collaborations. Let me highlight a few. With Deutsche Flugsicherung, we aim to partner on counter UAS and air traffic control solutions, protecting critical infrastructures.

With Diehl Defence, we are co-developing software-defined systems, combining sensors and effectors to multiply the capability of European air defense. With Quantum System and Avilus, we are combining mission software and UAV platforms with Hensoldt's sensor know-how, a strong fit for software-defined defense. And with 21strategies, we are advancing third wave artificial intelligence, applying tactical AI directly into defense applications.

We are also deepening our collaboration with Technical University, Munich, connecting to a powerful network of researchers and start-ups. This helps us identify emerging technologies early and engage with founders who might one day become Hensoldt partners. These start-up investments are crucial to keep pace with innovation. At the same time, we remain disciplined in traditional M&A. Our pipeline focuses on value-accretive targets in Germany and Europe, fully aligned with our strategic road map and financial guardrails. It's about expanding intelligently, not for size, but for capabilities, technology and strategic fit. So to summarize, grow with focus means being deliberate. It means leveraging our strong home base in Germany, deepening our European partnerships and expanding selectively into strategic regions. It means acting globally, but always guided by one purpose and one culture.

And that brings us naturally to the next axis of our North Star, lead our teams into the future because growth and technology are only as strong as the people behind them, the leaders and the teams who make Hensoldt what it is today. Let's look at how we are shaping the culture and the people that will carry this company forward. When we speak about growth beyond 2030, we must speak about our people because no matter how ambitious our strategy, no transformation succeeds without a strong team and the right culture behind it.

At Hensoldt, we have built something special, a company that is both high-performing and deeply human. Our people share a strong sense of purpose to make a difference for a safer tomorrow, and that purpose translates directly into performance. That is why we are proud to position Hensoldt as an employer of choice, not only in defense, but in the entire European technology landscape, a place where people find meaning, where people find opportunities and the confidence to grow with us.

This ambition rests on 4 pillars: systematic attraction, development-driven growth, meaningful retention and our leadership in sustainability. That creates a strong fundament for our purpose. Let me start with attraction. The competition for talent, especially in engineering, software and AI has never been fiercer. To stay ahead, we have made recruiting a strategic discipline where we combine targeted campaigns with real partnerships, sponsorships like [indiscernible] that inspire young talent early.

career days and on-site events for technological experts and dedicated campaigns that reach specialized groups from software engineers to former soldiers. Our focus is not on mass recruitment for positions we frequently search for, but on precision, identifying the right profiles, building communities and staying visible in all our home countries and home locations. Our refer a friend program has become a real success story, accounting for around 1/5 of critical hires. Our employer ratings, for example, 4.3 on Kununu reflect how people experience our culture.

And with nearly 70,000 applications this year, Hensoldt is firmly established as an attractive modern employer. Equally important, we are investing in the next generation, 30% more apprenticeship positions since 2023, combined with our Hensoldt fit curriculum that blends technical depth with personal growth because the future of our company starts with the people we train today. The second pillar is development. We believe that learning is not a side activity. It is part of our DNA. Our training portfolio includes more than 600 internal courses and 40,000 participations per year, complemented by digital formats like LinkedIn Learning and mentoring programs that connect experienced leaders with young talents.

We use these formats not only to transfer knowledge, but to build capability in project management, systems engineering, AI and in leadership. Our [ Beyond Horizons ] learning journeys promote an innovation mindset and our professional certification program ensures that our people are globally competitive. Talent identification and succession planning are now fully digital, helping us build a robust talent pipeline and fill key roles internally for sustainable growth.

This is how we create continuity and resilience as we grow and perhaps most importantly, we are strengthening leadership. Our leadership principles, ownership, collaboration, excellence and innovation are not just words on a slide. They are becoming a part of how we lead and decide every day. The third pillar is retention or more precisely belonging. A strong culture is a reason why people stay, perform and grow with us. Our culture evolution initiative drives this forward, combining top-down leadership development with bottom-up initiatives that encourage collaboration and innovation. We also take well-being seriously in those stressful times.

Our new health and leadership survey connects leadership behavior directly to employee well-being because sustainable performance depends on balance. As a result, health-related performance losses have gone down significantly in the past year. And in addition, our employees perceive leadership at Hensoldt to be stronger than in other companies. We offer flexible work models, targeted benefits and a growing employee share program.

Today, 2/3 of all Hensoldt employees are also our shareholders. That is a powerful sign of identification. And with a retention rate above 95%, our people are not just staying, they are choosing to stay. This is what it means to lead our teams into the future to combine ambition with care, performance, purpose and leadership with humanity.

Our sustainability strategy is built on 5 pillars. Climate, society, compliance, innovation and diversity. Together, they guide how we operate, how we invest and how we measure our impact. Let me briefly walk you through these 5 pillars. Climate. We are on track to become carbon neutral by 2035. Between 2020 and 2024, we reduced our direct Scope 1 emissions by 22%, and we now use 100% green electricity in Germany, France and U.K.

Last year, we calculated our full Scope 3 footprint for the first time, an important step towards reducing emissions across our value chain. Society. We take our role as a responsible industrial citizen seriously. Through initiatives such as Made for Germany, we engage in constructive dialogue with policymakers to strengthen security and innovation. At the same time, we continue to focus on health, well-being, integrating these topics into our leadership and employee surveys.

Compliance. Our business is grounded on integrity. We have reinforced our global ethics and compliance program, introduced a 24/7 whistleblower tool and continue to provide mandatory anticorruption training for all employees and partners. Innovation. Sustainability now starts at the design table. We evaluate new ideas using sustainability criteria, invest in eco design and develop digital road maps that make both our products and our operations more efficient.

And last, diversity. We are making steady progress. Women now represent 25% of our leadership team, and we have rolled out group-wide unconscious bias training to ensure equal opportunities for all. Our consistent efforts are reflected in our external ratings, a benchmark we take very seriously. In 2025, we achieved a Sustainalytics score of 21.5, ranking second in the global aerospace and defense sector. MSCI rates us A, positioning Hensoldt among the industry leaders. S&P Global places us well above the sector average with 45 out of 100 points. And EcoVadis awarded us a bronze medal, putting us in the top 35% across all industries.

These results matter not only as a recognition of progress, but as a clear sign to our investors and partners that Hensoldt operates responsibly, transparently and sustainably. Strong ESG performance reduces risk, enhances resilience and strengthens our reputation. In short, it's good for the business, and it's the right thing to do. Our people and our sustainability strategy are 2 sides of the same coin. They secure the future of Hensoldt, building a company that performs, endures and inspires. With that, let's move now how we lead our teams and how we deliver financially. And this is over to you, Christian.

Ye,s. Thank you very much, Oliver. Yes, what we've seen is just and underlines the truth is central for Hensoldt's success, and our performance is built by people and proven in numbers. So let me now take you through how that performance translates now into financial results, our outlook and how we continue to balance growth on the one hand, profitability, but also resilience, which is key for our business.

So now first of all, a quick recap, first 9 months, strong across all key performance indicators. So we have achieved an order intake of more than EUR 2 billion, driven by our air defense radar programs, Eurofighter and the U212A submarine program. Group revenue reached over EUR 1.5 billion, representing a 14% increase in core revenue.

Our Optronics business continued its strong momentum, while Sensors gained significant traction in the third quarter, exactly as anticipated following a slower start in the first half. Backlog rose to EUR 7.1 billion, a new record, resulting in a book-to-bill ratio of 1.3x. And our profitability reflects this healthy top line performance. Adjusted EBITDA increased by 13% year-on-year to EUR 211 million with a strong margin of 13.7%, slightly better than last year.

So in summary, we are firmly on track to meet our full year guidance with strong growth, robust margins and a solid balance sheet, an excellent foundation as we are in the final quarter of the year.

Let's now have a closer look at our segments, how they developed and the performance where it's coming from. Starting with Sensors. Order intake reached EUR 1.7 billion, exceeding last year's high comparison base. That corresponds to a book-to-bill ratio of 1.3x. And the growth as in orders was driven by major orders from Eurofighter rebaselining, the [indiscernible] program and TLM 4D radars for Ukraine. Revenue increased to over EUR 1.3 billion, fully in line with our expectations and excluding the declining share of pass-through revenue, core revenue grew by 12%.

Adjusted EBITDA improved to EUR 199 million with only minor product mix effects. Some temporary dilution came from the ramp-up of the new logistics center in the first half as elaborated, and an investment that will pay off in the future in productivity and scalability in the months and years ahead. Turning to Optronics. We achieved a strong order intake of EUR 328 million, corresponding to a book-to-bill ratio of 1.4x, driven by the orders of U212A submarine program, retrofit, gimbals and sites for ground-based systems. Revenue performance was excellent, continuing the strong momentum of previous quarters. And the German entity stood out with 27% growth in the first 9 months, driven by accelerated production in ground-based systems.

And as outlined before, we reached an important milestone, the transfer of ground-based business [indiscernible] from the [indiscernible] size building to the new optronics campus. And this will provide the space and the efficiency needed to sustain our growth in this area. Adjusted EBITDA in Optronics rose to EUR 12 million, reflecting higher volumes. Overall, both businesses, both segments are performing well, delivering growth, profitability and operational resilience.

And now let's turn to the full year guidance and our midterm outlook. So following the parliamentary approvals following the processes we have seen in the last weeks and several major procurement programs in Germany, we have significantly raised our book-to-bill guidance from 1.2x to a range of 1.6x to 1.9x. As Oliver has mentioned earlier, key programs -- we expect to book key programs such as Eurofighter tranche 5, the Luchs 2 reconnaissance vehicle in the coming weeks, both of which will have a substantial impact on our order book.

And we also specified our revenue guidance for EUR 2.5 billion in full year. And of course, the rollout of the new logistics center plus the move of the ground-based system business and new facilities represent a long-term investment in our competitiveness and into our efficiency. And while it temporarily moderates revenue recognition, it's an essential enabler for future scalability. We are guiding to an adjusted EBITDA of 18% or higher, maintaining the strong profitability as we expand capacity. Free cash flow conversion remains at 50% to 60% and net leverage target is unchanged to 1.5x, underlining our disciplined balance sheet management.

Dividend payout will also remain at 30% to 40% of adjusted net income, fully aligned with our commitment to shareholder returns. And now from short term to medium term, let's now look how our expectations and beyond look like. In 2026, we expect the momentum in our [indiscernible] order book to continue. We expect 1.5x to 2x book-to-bill ratio, ongoing demand and order momentum. Sales are expected to grow by around 10% EBITDA margin improvement of 50 basis points, driven on the one hand, operating leverage, efficiency gains, but also efforts for production capacity.

Given the ongoing CapEx for infrastructure expansion, we mentioned this EUR 80 million, the cash conversion will be a little bit lower to around 2026, a temporary effect we have planned for. And let me also highlight that we will not show it in the one-offs. We will put it in our recurring figures to make it more transparent also for you guys. Also some words then will follow. At the same time, we continue to reduce net leverage and maintain our disciplined balance sheet approach. For the midterm, we expect order intake to continue outpacing revenues, translating into an average organic growth of around 15% to 20%, slightly more back-end loaded as the large programs, as I've outlined in the beginning, ramp up.

Margins will continue to expand by about 50 basis points per year, reflecting scale and productivity gains, while cash conversion normalizes again to around 50%, coming back to 50% to 60% from 2028 onwards. Again, here, 1.5% CapEx reserve planned in the normal cash conversion.

Dividend policy is unchanged, 30% to 40% net income payout ratio, supporting both investor returns. In short, the outlook combines strong momentum with sustained profitability and disciplined financial governance and from the near term to our long-term ambition and the confidence behind our 2030 targets.

So as explained earlier, we confirm the ambition to achieve EUR 6 billion revenues in 2030. And our confidence in this goal has only grown since we have [indiscernible] this guidance by EUR 1 billion in May. This increase across defense budgets across Europe has now fully materialized, especially in Germany, which continues to lead the way in modernizing its armed forces. And this provides sustained tailwind for order pipeline and long-term demand visibility. We are seeing that this translates into firm orders for key products from air defense radars to ground-based systems. And all of this strengthens our belief in sustainable organic growth supported by demand on the one hand, technological leadership, strong market visibility and which could lead, I have to say, on an even higher organic revenue growth that assumed until now.

By 2030, we expect an adjusted EBITDA margin of 20% or higher, reflecting both scale effects and the efficiency gains achieved via operations 2.0. And importantly, our journey will not end 2030. We see a smooth, sustainable trajectory beyond driven by next-generation technologies as outlined today, the growing service business and software-defined defense. Let's now take a moment to look what underpins this confidence in hard figures, meaning revenue visibility, revenues backed by order backlog. We expect order backlog to reach EUR 8.5 billion by end of this year, the strongest in our company's history.

This gives us visibility we need to go for capacity expansion. Around 91% of our 2026 revenue will be secured through both long-cycle orders and recurring short-cycle business. For 2027, it will be 65% of revenues already presecured. And for 2028, roughly half of our expected revenues is already covered by existing contracts. And this visibility is a major asset, one that few companies in our industry can match. And now let's know how this growth turns out into across our segments and across our technology. So while sensors has driven our growth in the last 3 to 4 years, clearly, now we move to a more sustained and balanced growth ahead of us. Sensors will stay and continue to grow by air defense, Eurofighter and PEGASUS.

Optronics will grow even faster, supported by strong order back book, the ramp-up in ground-based systems first and foremost, driven by Army programs. In addition, software-defined defense is now contributing to our top line and will account for around 8% of total revenue by 2030. This diversified growth across both segments, complemented by digital and software-based revenue streams creates resilience and long-term profitability. And as you know, innovation is the backbone of Hensoldt's growth story. And so now let's look at how R&D investments look like. Innovation has always been and will be Hensoldt's DNA and remains the foundation of our competitiveness on national, international and global markets.

We stay with our investment policy, 5% to 6% of our revenues, we will invest into self-funded R&D. Customer-funded R&D has risen from 8% in 2020 to 15% in 2025 and will continue to grow on an absolute level. In absolute terms, this means at the end of the day, a sustainable increase in total R&D funding, and it also shows that customers trust Hensoldtby these pure figures, giving Hensoldt more and more R&D funding to be done. Within the R&D portfolio, we are increasing focusing on software-defined defense, digital architecture, AI-driven capability and ensuring that the technologies remain at the forefront of customer needs in all of our key products.

And this will secure technological sovereignty, global competitiveness and sustained growth potential.

And now let's have a look at the second basket of investments on CapEx and how we are investing now in the physical backbone of our growth. And as you can see on this page, we have steadily increased CapEx to support footprint expansion and capacity growth. As you have seen, new logistics center.

And let me show you 2 ways of CapEx. The one will be the base CapEx for maintenance and ongoing expansion, which will grow a little bit across the horizon until 2030; and on the other hand, we will have infrastructure. We have moved -- we have seen 2024-2025, CapEx level are elevated as we complete this key infrastructure investment, logistics center as you can see.

And now for 2026, we will have this new radar production site and this is why CapEx will peak to approximately 6% next year. From 2027 onwards, we have elaborated that we have some ideas. Additional logistics is the one, additional capacity for ground-based systems is the other. Nevertheless, it's not concrete yet, but we have planned with a capacity and CapEx reserve for approximately 1.5%, which should be sufficient and CapEx normalizing to 4%.

And also on this stage, from 2027 onwards, we will also shift our one-off policy in this regard that only S/4HANA will stay in as a one-off, but all other one-offs will be removed to be more clear in our quality of earnings. All these investments are fully aligned with deliberate scale, building the industrial and logistics capacity to fulfill the growing backlog efficiency.

And now let's move on to the next enabler of growth strategy, our financing structure. And in summer of this year, most of you know that we successfully refinanced our syndicated loan through a new syndicated facility and promissory note, and thanks also to the partners here in this room who have supported us. And this is complemented by a EUR 400 million bank guarantee line.

This was a decisive step for Hensoldt, strengthening the independence, flexibility and resilience. And key highlights include that we got the release of legacy securities from previous leverage buyout structure. We financing has secured until 2032, long-term stability. We have improved the margin ratchet, and we have a more diversified debt profile, reducing risk and increasing resilience.

And in short, this new structure gives us an excellent foundation to continue executing our growth strategy confidently and independently. And with that in place, let me conclude the financial section with our capital allocation priorities, which are more or less unchanged. First, fueling the growth. We will continue to invest, as you see in the figures in HENSOLDT 2.0, scale in production, strengthening technology and developing our people.

Secondly, sharing the growth, we maintain a dividend policy of 30% to 40% payout of adjusted net income that our shareholders will anticipate and participate in our success. Strategic acquisition. We pursue value-accretive M&A, particularly in Germany and Europe, focusing on technology and markets, but also now on the value chain. And last not least, financial discipline.

We adhere to a conservative debt profile, maintaining flexibility on the one hand and resilience on the other hand. And this disciplined framework will ensure that we can invest, that we can deliver and then we can reward on a sustainable ongoing basis. Yes, coming to the financial takeaways. Last not least, First, we have a very strong order book, and this provides us with an excellent visibility and the decisions we take are well balanced.

We are operating in markets poised for sustainable multi-decade growth. We combine profitable expansion with disciplined cash generation, enabling reinvestment, dividends and value-accretive M&A. And we remain deeply committed to innovation, investing in R&D and leading the transition to software-defined defense. And with that, we are absolutely confident in the path ahead, a path of disciplined growth, technological leadership and long-term value creation.

And with that, back to you, Oliver, for the wrap-up and closing remarks.

Let us have a look at what drives our business in the future. Beyond 2030, we see continued sustainable growth supported by both geopolitical need and technological transformation. Geopolitically, hybrid conflicts have become the new normal, reinforcing the political consensus around credible defense and deterrence. NATO's 5% of GDP target, including 3.5% for core defense investment will ensure a high sustained spending.

Technologically, growth will be driven by massive investments in conventional capabilities, long-term service and upgrade cycles and the rise of software-defined systems. These elements ensure recurring revenues and long-term customer engagement with our technology, customer intimacy and delivery capability, Hensoldt is right at the core of this transformation.

Ladies and gentlemen, when we called this Capital Markets Day, delivering North Star a new era for our business, we meant it because what you have seen today truly marks the beginning of a new chapter, perhaps even a new book in the Hensoldt story. We have evolved from being pure-play defense manufacturer of defense electronics to become a leader in multi-domain solutions from building sensors to building connected systems that see, understand and act across the domains, land, sea, air, space and cyber.

This is what it means to deliver North Star. It is not only about growth, it's about transformation of our technology, our business model and our role in Europe's security architectures. At the heart of this evolution lies software-defined defense and our new solution, the MDO Core. They make our systems adaptive, networked, upgradable, turning sensor data into operational insight and insight into action.

With them, Hennsolt moves from supplying components to enabling decision superiority. And that brings us back to the idea I introduced earlier today, fight tonight and fight tomorrow. Our customers must fight tonight, meaning they must defend themselves with the systems already in service while preparing for the next generation to arrive against an adversary with mass, they need more class and they need it fast. That means software-defined data-driven solutions that connect sensors, extract meaning and create shared situational awareness on the battlefield.

But it also means delivering hardware at speed, upgrading and ramping up production to keep their systems combat ready. So even as we innovate through software-defined defense, we are stretching our operations to the limit to deliver at scale right now because speed of delivery has become as decisive as technological superiority. At the same time, we are preparing to fight tomorrow, expanding capacity, industrialize at a pace to meet the rising demand from 2027 onwards, this new generation of systems will begin to enter service and ramp up towards 2030.

And when they do, they will already be enabled by our SDD and MDO solutions, more connected, more autonomous and more effective from day 1. That is what delivering North Star means in action, fighting tonight with intelligence and speed, fighting tomorrow with scale and innovation and building a future where both come together seamlessly.

Our future business model is built on exactly this foundation, smart and connected sensors, leadership in multi-domain operations through software-defined defense and recurring higher-margin revenue streams from services and data-centric software. We will maintain and evolve our growing installed base while developing new models such as Software as a Service and digital mission enablement.

But this transformation does not happen in isolation. The entire defense industry is changing. New players are entering the market, companies like and the Schwarz Group bringing fresh technologies and new perspectives, start-ups such as Quantum Systems, Stark, AC or Titan are accelerating innovation and challenging traditional boundaries. And major OEMs like Rheinmetall are expanding their reach across domains, redefining their roads. In this dynamic environment, Hensoldt stands confident and clear. We master scalability and multi-domain operations.

We are becoming increasingly software-driven. And we act as bridge builder between established and emerging players, shaping a new European defense ecosystem built on collaboration, openness and trust in Europe's own capabilities. That is why HensoOLt is stronger, more agile and more future-ready than ever before. We are scaling, we are connecting, and we are shaping the future of Europe's defense. We are delivering on North Star with purpose, with rigor and with a determination to protect what matters most. Europe's freedom and security.

Thank you very much for your attention.

Thank you, Oliver. Thank you, Christian. We are happy to take your questions now. [Operator Instructions] And we start with Sash.

It's Sash Tusa from Agency Partners. Three brief questions, 2 of which are probably interlinked. Your slide on partnerships, did not include Leonardo, which is one of your second largest shareholder. And when they acquired their shareholding in you, they made a lot about a partnership there. You don't seem to reciprocate on that. I wonder whether you could talk about your relationship with them at the moment.

And then -- and this may or may not be related, the very little reference to FCAS in your presentation. Where do you think the whole FCAS program will go? And what is your plan B for if France or Germany can't agree? And then the final question is just on M&A. I just wanted to check that I understood what you say about possibly buying into your -- into the value chain. Does that mean that you would expect to buy more of your -- or some of your suppliers as a means of strengthening your own resilience?

So thank you very much, Sash, for asking these questions. A good opportunity to bring the elephants out of the room. So LEONARDO. Well, LEONARDO was not mentioned on this slide, but that is not a message in that regard. I mean, traditionally, we have a very strong relationship with LEONARDO. Yes, they are our shareholder, but also on project program level, we do cooperate very well.

Best example is the Eurofighter. So ever since I joined as CEO, I'm in a regular exchange with LEONARDO. So we have also regular strategy meetings. Unfortunately, some of the, let's say, programs, which bear a lot of opportunity, including the program of Italy, didn't really mature to crystallize or catalyze this good cooperation, which is still in place.

So earlier this year, we had a German, Italian roundtable with the government. And I think that is probably the paradigm when LEONARDO entered as a strategic investor into Hensoldt, it was before the vendor. At that time, I think it was very clear that we were heading for a more European approach on defense. Ever after the vendor, it is also that we see a strong impetus, which, of course, Hensoldt takes profit from that we look at national sovereign capabilities.

And that's probably why recently, there was not a big momentum despite this very strong cooperation that we do have with LEONARDO. That's why we didn't see this as a, let's say, strategic relevant element to put on this slide where you have the dynamic players like start-ups, new partners that are opening international regions to us. But again, the message is not that we put that at stage. So I think the future of LEONARDO and Hensoldt is very much connected to how does the European also G2G political network evolve?

Are we willing to work together in some of the programs? And then I think LEONARDO and we, as many other European players, and so on, we are ready to give the industrial dimension to it. Probably that leads the way to FCAS.

Yes, at the moment, I think the press is full, probably also read one of my quotes where I said the behavior of one of the partners is rather irritating because personally, I still am a strong believer that Germany and France as the strongest nations in Europe need to join forces to drive things forward.

And also looking at the sensor pillar, which is the core of what Hensoldt is doing in FCAS together with Thales and Indra, I think here, we have the opposite picture of what we see between Airbus and Dassault on the level of the next-generation fighter. We had a very trustful and also very innovation driving partnership with our competitors, Thales and Indra in that pillar because we had engineers coming together that really were driven by joint innovation driven by bringing technology forward.

And I think on the very top level, that's why this political will doesn't yet translate into a concrete program is we see and that aligns with what I've said before, there is no real willingness on compromise. And as long as we have this confrontation, we have to see how this goes out. The Chancellor Merz took it as a topic. So as we -- and you know from the media, there will be meetings in December where actually I think there remains a strong will to secure, to rescue this program, which is heavily under stress at the moment.

Going forward, I believe that probably it would not die, but it will take a total different form. We hear the stories that probably the focus shifts from the fighter to the system of system, where we have manned, unmanned teaming, where we have networking of sensors and all of that. And I mean, you heard the story about MDO Core and also part of the MDO Core IPR is based on what we did in FCAS.

So I think in that regard, I have no real concern despite as a European, I would regret if this opportunity disappears. But from the Hensoldt perspective, we see that in every new form of FCAS, we will have our share. And also looking at manned unmanned teaming, looking at Forton UCAV, which is currently under discussion in Germany, probably also while FCAS was struggling, the focus shifted technology-wise. And in all these programs, we are very present, and I see a strong future for all the engineers that so far have worked in FCAS.

Yes. And your question regarding the value chain. So the answer is clear, yes. And why it's yes? First, we have to understand that it's not only Hensoldt, there are also the big other OEMs, 65% approximately of the revenue is sourced. That means the value chain as such is one key success factor or key decisive factor in order to maintain this ramp-up besides investing in people, capacity and so on.

And this leads me to the fact that transparency on the value chain is key, where we are building up the necessary tools that -- and then there has to be a good screening who of the investors and who of the suppliers is willing to ramp up, who is able to ramp up with the structure, also understanding that 80% of ours and also of other OEMs are small and medium-sized companies. And there are then this goes along with challenges on the one hand, but also opportunities.

And there might be the one or the other critical supplier for us where it makes sense that we go for vertical integration to secure, on the one hand, supply, but also secure capacity to be more balanced in this regard. Certainly, yes.

Ross, go ahead.

Ross from Morgan Stanley. Three questions on your 2030 targets. First of all, on the EUR 6 billion, I think you previously kind of tagged this to an assumption of 2.5% of GDP in Europe. But in your slides, you think Germany is going to be at 3.5% and the rest of Europe is going to be at 2.5%. So why is the EUR 6 billion not higher? Or is this just a timing issue with the ramp-up?

Secondly, how much of the EUR 6 billion is M&A? Again, I think you previously said it was around EUR 600 million, but I couldn't get the ruler out to work out on this slide how much that is.

And then lastly, just on margin, obviously, at least 20% EBITDA. How should we think about this at the EBIT level?

Yes. Maybe to start with your second question. I think when you calculate these figures through, I think we end up now in a figure of approximately EUR 5.7 billion by 2030. So it's a little bit higher than before. when we ended up in 5.4%. So this is what we also indicated that we see more room for organic revenue increase. So this is the first answer.

The second is, yes, why are we not increasing? I think -- so let's be honest, Germany is really the forefrontner, and it's really materializing, but also be honest, the one or the other European member who has even signed off this 3.5% is some are hesitating. So we do not see the same maturity level as we do in Germany. So there is for me, the one or the other question mark. And we have to look at 2026, 2027, how this turns on, if there is more upside also from states who are currently a little bit under pressure, it could be -- it could give us further tailwind, but this is how I look at it currently. And also maybe Oliver to add.

Yes. Maybe what we have to consider on this one is, yes, indeed, we have the clarity on the 3.5% GDP spending. We have the 5-year cornerstone paper, which reflects a spending of EUR 152 billion, if I remember well, in 2029. So the money is there. But the problem at the moment is that we don't have the clear visibility what will be the contracts, especially in the outer years.

At the moment, actually what happened, and you saw it with the looks that we jumped from 90 to almost 300 vehicles because what the customer did, they raised the quantities in existing programs, exploiting the full quantities of the framework contracts. But the next phase will be how do we build new capabilities with these -- with the money that is truly available.

And that is for us, which does not make it very easy for us to do the math at that stage. What is the addressable volume of these shares, especially when it comes to new capabilities. The only thing what we can say today, and that is what we try to present to you during the Capital Markets Day, these new capabilities will be a lot about multi-domain operations, how can we connect how a new class for the battlefield. And that's why we're investing now. That's why we are an early adopter on this MDO core principles because I think that will bring us into a very good position to participate in the future new capability procurements.

Yes. And your last question, EBIT. The difference between EBITDA and EBIT is approximately 4.5%. So we had a little bit more because we started to amortize this capitalized R&D. But going forward, I see it in a more stable way. So 4.5% between EBITDA and EBIT is for me the right figure to model.

Let's move on to Sebastian.

Sebastian from BNP. I also have a question on margin. And you apparently did guide to, I think, rather 21% by 2030 because you also made a remark of 50 bps increases. You also said last week on the quarter 3 conference call that optronics you'd see to go back towards 20%. So implicitly, that means there is not that much of a margin expansion in sensors, and that's not necessarily intuitive if we think about the growing contribution from service and the software stack that comes with it, the phaseout and also of the headwinds that you did face in the year '25. So if you could just walk us through what the sort of key elements are, that would be great.

Yes. First of all, I'd like to reiterate that. So we see end of this year, Optronics 14%. We went into this year with 10%. To be honest, also having some unclarity about the move, how will this phase out, how are we able to produce under these circumstances. And this is for me now a very good sign. Going forward, I see every year approximately 2% in EBITDA improvement because now we come to volume-based business in Optronics. It is a classic production-based business.

If we ramp up, we get economies of scale out. And by 2028, I expect that margins from Sensors and Optronics will be comparable on the group level and going forward. So what does this mean in sensor? It was the driver the last 3 to 4 years of extremely margin expansion. But now we are -- have to include things like product mix.

TRML-4D will be still a driver, but there will other aspects. If there is a second Pegasus, we know that it's lower in margins, a very important program, but lower. And of course, solutions and software-defined defense come in the first stage with some development effort, which weighs a little bit on the margin in the front years, but gives us room to improve also in the future. And this is how I currently think about that.

Let's also be clear in the last year, we were always able to do some things on the margins. And -- but I'd like to stay with that level of doing the homework, delivering and then see how margins progress. And I think the last 3 years, we were quite successful to also expanding margins beyond a certain level of guidance.

May be just quickly follow up on the Pegasus comment you made. So there is an element of Pegasus included in the EUR 6 billion now or how should we think about that?

There are -- is a further batch included. Yes.

We'll take Aymeric next.

Yes. It's Aymeric Poulain from Kepler Cheuvreux. You give this guidance for service increasing from 1% to 8% by 2030, but do you have a target also an ambition for the next decade? And I think you mentioned something about services overall in the U.S. maintenance and services being 50%. Is that part of an ambition to rebalance the portfolio in that direction?

And then you said it won't -- this increased service will not be accretive in the first part of -- I mean, in this decade on the service increase, but what about the next decade? Do you see the software services revenue being more profitable than the hardware business today?

And then last on the PEGASUS, the next 3 batch, the first orders were obviously including development costs, so EUR 0.5 billion per PEGASUS, so it's a very big number. For the next one, what would be the right level of revenue per unit, so to speak? And how much of that would include services, please?

Okay. I think, Aymeric, first of all, we have to be clear. So software-defined defense is not the same as service. So software-defined is what has outlined today and what Oliver has elaborated. Services for me, maintenance, MRO, spares and something like that. And in this regard, we were at around 17% 2024. I think this year will be in the same range. And going forward until 2028, 2029, we will be approximately at 20%.

On the one hand, we have an increase in service business. But with the laid out budgets, also the core, I call it, core programs in radar and optronics will grow even faster. But with having more platforms in the armed forces and on the same hand, requiring the circulation reserve, Ulamla availability of systems going beyond 90%, which is comparable with car industry, which is beyond 95%, we will see an enormous recurring business in the service.

And I -- from my point of view, I estimate that service will be from 2030 onwards more in 25%, 30%, at least, as Oliver has outlined, from a pure mass of platforms in the forces and having this business on.

There's one element to it also. And probably that is, as I explained before, for calculating the guidance on revenues and so on in service, I see a strong, let's say, paradigm shift in how the armed forces are thinking about service. So I come from a time, most of you know that I have been a professional soldier in air defense. At that time, we had a 10-minute status, and we had spare parts even delivered by helicopters to the site to keep the systems up and running.

The past 3 decades, it was like that the customer hardly ordered because he had scarcity in budgets, hardly ordered any spares. They said we can buy it just in time because they could afford to have a tank, a vehicle or an airplane to sit on the site and be down for operational service or technical service. So in the discussion with the customer, we see that this is changing massively.

So the first wave is that we see a growth in ordering spare parts, which is along with the product margins and so on. But I think there will be a new definition of how service will be done, and we have plans under discussion with the customer of even building mobile service troops where we go to the customer side to do the servicing for the vehicle, for our product and so on, which, of course, also comes with some investments, some conceptual changes in how we do it.

So that is probably the variable in really defining the margin where on the short term, we said, okay, there will be some efforts. But in the long term, once this new service system, which is definitely a part of Operations 2.0, once our new service system architecture is in place, then of course, we can gradually improve.

Yes. And then last question was on PEGASUS. I think when we go for another batch, I think a figure around EUR 1 billion is the right estimate, taking into account that some of the predevelopment was done already. So this is how you should -- how you could model.

Then I think Charles is next.

Charles Armitage. A couple of confirmation questions really. Your guidance for the full year was unchanged, except for the book-to-bill. Why didn't your CapEx -- sorry, your cash conversion go up with that? Was it the CapEx coming through already? And then the second one is medium term versus long term. So over the medium term, you've got by far the strongest growth in Germany, yet I think over the long term, you're going from 57% of sales in Germany to 50%, which kind of doesn't make sense arithmetically.

Yes. Maybe first question, why did we not improve cash conversion? I think there was a similar question on Friday because there are no advanced payments. So the good news is that we have advanced payments. The bad news is it's not a given. So it's still on a contract-by-contract decision negotiation, heavily arguing in each program to do that. So currently, what I see as we had in the last 2 years that the increasing working capital we need to grow is balanced by advanced payments.

However, not more, but it gives us a cash conversion performance, what I see this is balanced. Yes. So a second and maybe Oliver, you can contribute. Of course, there is much potential also go beyond 2030 with respective growth rates. But let's also be clear, we are now in 2025, 5, 6, 7, 8 years. It's a very long time that there is enormous potential in terms of service, software-defined defense, other areas for sure. But my perspective is let's look at it step by step as we move forward and then adapt in a certain direction, but tailwind is there for sure.

Further questions? David?

Just one slightly boring one, Christian. Just because it gets a bit hard to know what you have and included in free cash and what you haven't. Have you got a guidance on net debt for '26?

Yes. I think from a pure cash performance, I think that net leverage will be 0.3x less, something like that on a pure cash performance. But I have to say we have to also have a look at lease liability. You know this IFRS 16 standard where you are required to put in more liability in a phase where you rent more space, what we currently do.

So it could be that the pure cash performance is then somehow eaten up in the leverage. by a lease liability. But on a pure cash performance, I would say that 0.3x lower net leverage is a good estimate.

Okay. And then just, I guess, related to that, I guess to get to those numbers, you need quite good working capital inflows in '25 and '26. Is that what you're assuming?

Yes. I think that as we also did in the last year that we are -- with these advanced payments now in place, we can outbalance working capital requirements.

Further questions? Afonso?

It's Afonso Osorio here. Just one follow-up on the growth beyond 2030. I know you said that it's 5, 6 years down the line, but is it going to go from 20% plus in 2032. Is that a peak in terms of growth? Or is that going to normalize? You're going to say 20s going to be high teens, low double digit, high single digit?

How do you think about -- without putting a number 2035, how do you think about the growth and the phasing of growth into the next decade according to the pipeline you just showed as well?

Maybe to give you some indications on that because it's really far away. But when I look at the current Army programs, so what is envisaged and Oliver, you know it quite better than me, the contracts which will be placed now and also 2026, they do not last until 2029. The last until 2033, 2034, something like that. And this gives you maybe an impression that the growth rates we see between 2028, 2030 could be also there beyond 2030.

So this is for me a kind of an indication because many people now currently think that German Armed Forces contract until 2029 and then it's over. But when you look at the contracts with the sizes over the years being deployed in sites and aircraft and also our negotiations with the OEMs, they go far into the 30s.

Yes. And probably one thing to add, that's why we stayed so strong on our growth ambition in grow with focus. I mean that's why we're investing. That's why I'm seeing these teams, and you saw the video with the strong teams that we have there. And they are building the relations at the moment to sell whatever we have across Germany and Europe also abroad. And that is a potential.

But still, we are building those relations and we are understanding the needs in a global defense and security market. But at least from first guess, I would see that given that the company gets more international, then as we go forward, I think we are ready to sustain this growth also over time, the strong growth also over time.

And just a quick follow-up to that. Like in terms of the 10% international revenues, like what would be the key contributors in terms of countries? I mean can you have a sense of the speakers that you put in the video on the key countries, but can you just have a sense of which countries specifically within that 10% share of international revenues would be the key contributors to that?

Yes, it's really the key countries. And as I have outlined, we're trying to align that with G2G agendas of the German government because one of the challenges along with international sales is always export regulation. Going into countries where also I have been visiting I recently end of last year, I went to India together with the former Chancellor Schulz.

I have visited Ukraine recently with the minister. We had also a delegation with Minister the Foreign Affairs Minister in India, again. So we try to align that, and that gives us, I mean, a very good credibility or trust that those agendas are sustainable. So it's India, where also we see that the team is making very good progress at the moment. We still see Middle East, and that goes beyond UAE, it's Saudi Arabia, looking at the Eurofighter. I think here, we see a strong change also in the position of the German government. It is the U.S. and had outlined, I recently visited we're probably also in the discussion on tariffs.

We see -- and also the strong bias that Germany made on the P8, on the F-35s, on the CH-47 that there will be some return. I met with the ambassador in Washington, where we actually discussed how can we take momentum out of all the money that Germany is bringing to the U.S. to support German companies also in their endeavor to sell into the market.

And with our strong reference on the tanks, we are at the core of the U.S. war fighter. We have a strong interest of the FAA in passive radar. Our radars seem to sell very well, also talking to Lockheed Martin and some of the big primes. It seems they have a gap in this rather medium short-range part of the radar and sensor portfolio. And that's why it is very promising. In Asia Pacific, we're already, very strong in Japan, in South Korea.

Also considering that South Korea is really maturing as a key player. You saw the Poland buying the tank. So that's why we put a lot of effort there. And all of this activity, which at this stage, given the size of our engine is rather slowly, rather sustainably building those relations -- but once we have built the engine and once we would see a bit of a downturn in Germany, we are ready to sell across the globe.

Tim, do we have any questions from the online audience?

Yes, we have one question. The question is, could you explain why the revenue growth in 2026 is expected at around 10% year-over-year? So what factors are moderating this outlook?

Yes. I think there is one decisive topic, and this is simply lead time. So in our industry, also in our business, including also slowdown from OEMs, we have to assume 1.5 years approximately lead time from having a push in our order books until it's reflected into revenues.

And this is why I see the scheme of the last 3 years as we had this 8% to 10% growth per year also for next year. I think with the book-to-bill, we guide now for this year and rising order book next year, the are done and to go for this additional step. In addition, we have -- will have then more capacity for radar production from 2027. And this is why 2026 is, for me, a year of building up the lead time and from 2027 onwards delivering.

Thank you. I think, Yan, you have a question.

Yes. Yan from ODDO BHF. Just 2 follow-ups. The first one on R&D. Can you give us some indication regarding the evolution of the share of capitalization over the next 4 to 5 years? And maybe going back to SDD software defined. Can you help us understand the ramp-up of the new contracts, maybe using the contract. Can you give us maybe, for example, the share of the license revenues? I think the amount of the contract is EUR 850 million. So what is the share of the license in this amount?

Maybe first question, I think approximately 60% is capitalized. I think this is a good estimate also for modeling. And for the service based, I think we do not yet have it in our contracts that there are special licenses for software. This is, as has outlined, this is a concept of the future. So when will be fully rolled out and the platform is there, I'm sure there will be potential for the software-based topics or maybe also in PEGASUS or other programs, also combining it with MDO Core. But until now, it's not yet part of the business model. It's more a concept of vision for the future.

So I think -- just to complement, there are 2 elements, as you hopefully understood with the presentations we had today. So is a sub-element of the MDO core. So of course, from the program, as we are rolling it out, we will get constant flow of innovation into the MDO core. That's one element.

The second element is that looking at the and the various sensors that are put on this platform, there is a possibility to take the and roll it out, and that would be the software license, not in the core of the it would be rather with the Leopard, the Puma, the Shakal and all the other vehicles that are out there that have our sensors and third-party sensors.

They have actually a communication, a system or radios. So all of these have edge computing and storage capabilities. So we could just purely take the software and roll it out across all the landscape of German vehicles. And that would open up opportunity of those software licenses with a good revenue and profitable margins coming out.

Yes, but this is where we are currently in the concept phase. So where will bring -- make it a reality. We have first discussions with the Chief of Army, where we see a very strong shift, and that is also inspired by the battlefield of Ukraine, where Germany is leaving the idea of having dedicated platforms, functional platform, one for air defense, one for reconnaissance, one for this and that.

They are rather thinking, and that's where our MDO idea where could be a reference case jumps in that we rather disconnect sensors, effectors and C2, we spread the various sensors across the battlefield, we have various effectors on the battlefield and we could just decouple that from the platforms and develop this functionality across the battlefield, including then MDO assets that would fly in the air above from drones over aircraft up to satellites.

Any further questions here in the room? Tim, are there further questions coming from the online audience?

Yes. We have a follow-up question regarding the 2026 guidance. Is there any potential for upside beyond the projected 10% revenue growth in 2026?

For sure. Yes. So no, let's be clear. I think -- or maybe one step back. So 2025 was -- and we said it already in February when we laid out financials 2024, that 2025 will be a year of operational transition. New logistics center with all difficulties, to be honest, in the first quarter, and we have outlined, we have stabilized it.

Secondly, biggest transformation program in our company. And these 2 are now stabilizing and coming to a stage where we say, okay, we see that the motor is now getting up speed. So next year, I think we will be much more stable in logistics, we'll be much more stable in We will have some lead time effects from the programs which now come in now, and we have to build up capacity for further production.

So everything is in place that we could go beyond, but let's let's stay with the Hensoldt policy, starting with a realistic view and doing everything, doing our homework and then look quarter-by-quarter how this phases out.

And I think that I would say it in different words. And I think the conservative way that we have looked forward, and that's a good news despite that probably some of you are not satisfied with that outlook. But the good news is really we considered all the risks that we see also based on the experience of the ramp-up we had this year.

So that's why this is the conservative approach. And the good news is that there's opportunity inside. The opportunity is that the ramp-up will come. The opportunities is that with some of our OEMs in the deliveries, we are faster with regards to the lead time that also as we did, for example, with Pegasus, so we're still counting on a contract change later this year, where we see that the customer is trying to look in the past, we had early operational capabilities.

At the moment, he's even looking at very early operational capabilities, which would help us to build revenue milestones in the earlier sides of the program. That's the discussions which are ongoing. And last opportunity is for sure, MDO Core, where at this stage, we are really in very fruitful discussions with the customer, where based on some available budgets.

But here, we also have the planning process of the customer where normally he needs some headsite to allocate budgets -- but I would see with the pressure from the evolving threat that probably he would go into -- in the true sense of the word in building a war chest where he could finance such solutions as MDO Core. And if these opportunities flowed in, we are ready, of course, as we did in the past to share this with you to update the guidance and everything.

But again, I'm in full alignment with Christian and even with Lars and our team here, we follow this conservative approach, probably like some of the others on the market. And so far, it is always that we delivered on our promises, and that is what we want to do in the future.

So further follow-up questions on the '26 guidance or any other questions? Tim also checking on the online audience.

There are no further questions from the online audience.

So yes, big thank you to everyone. With no further questions, we would all like to thank you very much for coming to today, both here in the room and also virtually. Yes, have a safe trip back home. Have a wonderful evening, and see you soon. Thank you.

Thank you very much.

Thank you.

Good afternoon, everybody, and welcome to Hensoldt's 9M 2025 Results Call. Thank you all for joining us today. I'm Veronika Endres, Head of Investor Relations at Hensoldt. And with me today is our CFO, Christian Ladurner. Christian will guide you through this presentation today, which will be followed by Q&A. And with that, over to you, Christian.

Yes. Thank you very much, Veronika, and a very warm welcome to all of our investors and analysts following our company. It's great to have you with us today. I'd like to begin with a quick update of this time line, which you may remember from our recent analyst calls. Since then, our assumptions have further materialized. Right after the adoption of Germany's 2025 defense budget in September, the parliamentary sessions for procurement approvals gained strong momentum.

By the end of 2025, a total of more than a double -- high double-digit number of so-called EUR 25 million approvals will have been passed, many of them with direct Hensoldt involvement. The first tangible evidence was our recent guidance upgrade for the 2025 book-to-bill ratio published 2 weeks ago. While the majority of expected orders is still anticipated to enter our books in 2026, the increased guidance for this year already reflects the early materialization of these strong dynamics.

This sets the stage for a strong finish to 2025 with significant orders to be expected in the near term. Let me start with the Sensors segment. In October, we booked a major sustainment contract for the German P-8 Poseidon program worth EUR 130 million. Alongside the procurement of the German Eurofighter Tranche 5, the contract of our Mk1 radar is now in the flow down, and we expect to book the order with approximately EUR 180 million shortly.

The same applies to further orders for TRML-4D air defense radar for Ukraine, for Switzerland with a combined volume of around EUR 200 million. Notably, the Optronics segment will contribute significantly to our order intake in 2025, combining both upcoming and recently booked contracts with approximately EUR 1.4 billion. This is predominantly driven by the land domain. The contract for the new reconnaissance vehicle named Luchs II is currently in the flow down process. This landmark order represents a volume of approximately EUR 850 million for Hensoldt. In addition, we anticipate further orders for the Leopard 2 main battle tank and for the Schakal, the Boxer platform equipped with the PUMA turret. The latter we expect in 2026.

Further key contributors are projects for Algeria's border surveillance as well as upgrades for the German U212A submarines, both recently booked. I will give an overview of how these orders will contribute to our raised book-to-bill guidance for 2025 in a minute. Of course, all of you know that ramping up capacity is key to meet increased customer demand. Therefore, we have started our Operations 2.0 initiative, which we have introduced in H1 of this year. Since 2022, we have been expanding production capacity through continuous improvement, automization and outsourcing, integrated into our annual CapEx plan, and this will continue.

And of course, we will provide more details at our Capital Markets Day next week. Nevertheless, our first concrete initiative. This is our new production site, which will significantly increase our production capacity for air defense radars. This strategic capacity expansion will enable us to substantially ramp up production from 2027 onwards, especially for TRML-4D and Spexer radars. We are investing around EUR 80 million in this rented site, combining resilience with synergies across our existing footprint.

Let me now come to our financials for the first 9 months of this year. After outlining our promising growth outlook, let's now shift to what we have accomplished so far. So let me walk through our financial results for the first 9 months. To begin with, I'm very pleased with the performance we have once again achieved. Order intake developed as planned, reaching more than EUR 2 billion. Also this year's orders placement from Germany are heavily weighted towards year-end, we exceeded the high prior year figure by 9%. Key drivers behind this performance was the Eurofighter program as well as TRML-4D radars.

Revenue performance was strong, increasing to EUR 1.5 billion. Optronics continued its strong momentum, while Sensors further gained traction in Q3 as anticipated following a slower start in the first half of the year. Passthrough revenue continued to decline in line with our planning. Excluding parcel revenue, core revenue grew strongly by 14%, reflecting the strength of our underlying business. With a book-to-bill of 1.3x, our order backlog again reached a new record level of EUR 7.1 billion, providing us with an excellent visibility.

To sum it up, the increasing investments in defense by our German and international customers continue to translate into higher order intake and revenue. The strong performance of our top line is also reflected in our profitability. Adjusted EBITDA increased to EUR 211 million with an adjusted EBITDA margin of 13.7%. The increase was primarily driven by higher volumes in the German Optronics business. In the Sensors segment, product mix effects partly offset this growth, while the impact on margin from the logistical ramp-up has further diminished.

Additionally, we continue to capture cost and revenue synergies from the ESG acquisition, further strengthening our bottom line. Adjusted EBIT increased to EUR 122 million in 9M 2025. Cash generation was excellent in Q3. Adjusted free cash flow increased to minus EUR 119 million per 9M 2025, supported by advanced payments received. While on the other hand, investments in our working capital continued as planned to manage the business volume in Q4. To conclude, our bottom line is on track and set to gain further momentum as the year progresses.

Now let's have a look at our segments. The Sensors segment delivered a solid order intake of EUR 1.7 billion, exceeding previous year's high comparison base. This corresponds to a book-to-bill ratio of 1.3x. The development was driven by orders for the Eurofighter re-baselining and Halcon program as well as TRML-4D radars for Ukraine. Revenue in Sensors increased to EUR 1.3 billion. Despite the slower start in our radar production during the first half year, revenue growth was strong and fully in line with our expectations.

Excluding the declining share of parcel revenue, core revenue in sensors rose by 12%. Adjusted EBITDA in Sensors increased to EUR 199 million. Product mix effects had a minor impact, while the effect of the ramp-up of the logistics center in H1 is further diluting. This is reflected in the adjusted EBITDA margin of 15.1%, catching further up as the year progresses. As mentioned, cost and revenue synergies from the ESG acquisition contribute to this as planned.

Optronics realized a strong order intake with orders summing up to EUR 328 million, resulting in a book-to-bill ratio of 1.4x. This was primarily driven by orders for the U212A submarine retrofit, gimbals and site systems for ground-based systems. Revenue performance in Optronics was excellent, continuing the momentum from the previous quarters. This was boosted by the sustained strong performance of the German entity, which achieved revenue growth of 27% in the first 9 months. Main driver was accelerated production in ground-based systems.

At this stage, we are also pleased to have successfully the first step of the move of the ground-based systems business in the Oberkochen, from the former Zeiss building to the new build Optronics campus. This milestone will provide our business with the capacity to continue the strong growth path ahead. In terms of margins, Optronics continued to show a significant improvement compared to prior year with adjusted EBITDA reaching EUR 12 million. This development was driven by higher volumes from the German unit.

Let's now have a look how our order book will develop until year-end. In addition to the orders mentioned at the beginning, we are preparing for a broad series of additional contracts across our business areas such as for air defense, the Eurofighter program, our naval business as well as self-protection systems and services and integration. To sum it up, we are very well on track to secure major orders that will drive our order intake from around EUR 2 billion in the first 9 months to approximately EUR 4.4 billion per year-end.

Let me now come to our guidance for 2025 updated 2 weeks ago. First and foremost, order intake. Following the recent development, we have significantly raised our book-to-bill guidance from around 1.2x to a range of 1.6x to 1.9x. As highlighted earlier, we expect to book key programs like Eurofighter and Luchs 11 already within this year, pushing the book-to-bill notably upwards. Furthermore, we specified our revenue guidance to approximately EUR 2.5 billion.

As outlined in our recent analyst calls, the rollout of our new logistics center represents a strategic investment in long-term competitiveness and operational efficiency. While this go-live has temporarily moderated the pace of revenue growth in 2025, it is a critical enabler of sustainable growth and scalability in the years ahead. For adjusted EBITDA margin, we specified our guidance to 18% or higher. This reflects our focus on sustained strong profitability by investing in our capacity to secure long-term success.

For adjusted free cash flow, we continue to expect strong performance with an unchanged cash conversion target of approximately 50% to 60%. And our net leverage target remains at around 1.5x, reflecting our disciplined financial management. Finally, our dividend payout ratio will continue to be in the range of 30% to 40% of adjusted net income, in line with our commitment to shareholder returns. So coming now to a conclusion, let me mention the following key takeaways. The ever-increasing demand for our products and solutions is reflected in substantial order intake across both segments, driving order book to a record high of EUR 7.1 billion. This continues to provide excellent visibility for the years to come.

Our revenue performance remains strong, driven by sustained high momentum in optronics and accelerated growth in sensors during the second half of the year. This is reflected in our solid profitability, supported by higher volumes in Optronics, while the impact of Sensors margins from the logistical ramp-up is further diluting. Our outlook remains promising, and we are strongly positioned for the upcoming growth. Germany is taking the leadership role for defense in Europe, and Hensoldt has the right strategy, products and capacities to play a major role in upcoming German and European procurement programs. This is now increasingly reflected in concrete orders, driving our book-to-bill guidance significantly upwards and with further major contracts on the horizon.

So in short, Zeitenwende 2.0 starts to materialize. Through targeted investments in capacity and processes, we are safeguarding our delivery capability. We proactively secured the further ramp-up of our air defense production from 2027 onwards, safeguarding our delivery capability and long-term sustainable growth. Thank you very much for listening. And with that, I'm now happy to open the floor to your questions.

[Operator Instructions] The first question comes from Sebastian Growe from BNP Paribas Exane.

The first one would be on the Optronics segment. And apparently, the segment is outpacing the earlier indicated 10% EBITDA margin for this year. And against the backdrop, where do you see the segment trending both in '25 and particularly in the midterm, i.e., do you eventually see scope to return to the 20% plus levels that you achieved in 2020? And as a follow-up to this, as Optronics is going to roughly double its order backlog based on your statements. How should we think about the growth cadence in the outer years, i.e., would you agree that optronics might ultimately outgrow the Sensor segment?

Sebastian, many thanks for this question. So yes, a very good question about Optronics margin. You're right. So we guided until half year 10%. I have to say, currently, we see with the positive development, a figure which goes more into the direction of 14% EBITDA at the year-end. With having said that, we see every year a figure of around 2% in addition. And of course, in the midterm 2027, 2028, we expect that figures at the profitability of Optronics will be in this year, as you have mentioned, so for sure.

And the second question, yes, you're also right. We see more momentum now from the optronics. We have to keep in mind that sensors is a classic project business with heavy also engineering load in the work, whereas Optronics is a delivery business. That means if we have everything in place and industrialized products and the demand is there, which is currently there, we are able to ramp up more intensively. And for, I would say, more concrete numbers, I'm happy to share with you on the upcoming Tuesday that we will give some more insights how the segments will progress.

Makes sense. I won't stretch my luck too far. Just one other quick one, if I may, on some comments we heard recently from your second largest shareholder. Those very comments suggest that there might be scope for an expansion of the cooperation between the -- as you referred to legacy part of the product offering. And I was just wondering considering also that there are so many cooperations happening in the defense sector, in which areas might you see headroom for more cooperations and that could either be then with the Italians or then eventually also other partners?

Yes. Thank you very much. You're right. The dynamics is quite high currently, and Leonardo has stated that there is a good collaboration with our company up to now, especially we have currently in the Eurofighter and also in the air defense topic. I see within -- with Leonardo, there are, of course, also opportunities in the land platforms to go for more cooperations even if there is nothing material yet. And of course, I think with the increasing budgets coming from Germany and acting Germany as a frontrunner, of course, other companies are interested in participating of this growth and then going to partnerships with German OEMs, but also in Hensoldt.

And when you have seen now the Luchs II contract, which is at the end of the day, a cooperation between GDLS (sic) [ GDELS ] so General Dynamics Europe Landsystems (sic) [ General Dynamics European Landsystems ] and Hensoldt gives you also a concrete example where this successfully happened. And going forward, we see also possibilities in the land platforms, for example, also in space, also in air defense in all ranges. So there is more to come. And also here, we will give you some more details on Tuesday in the Capital Markets Day.

The next question comes from the line of Ross Law from Morgan Stanley.

So the first one, just on order intake. Obviously, it continues to track strongly. And obviously, you've raised full year guidance quite materially. What's a little surprising is that your cash guidance is unchanged. Can you maybe just flesh out the moving parts there into year-end as I would have thought that you're going to get a reasonable amount of down payments like you've noted for the 9 months? And then just on the outlook, you've confirmed your 2030 sales guidance. Can we also expect you to provide 2030 guidance for other metrics like margin at next week's CMD? And given the strong visibility from Germany specifically, can we expect you to provide some indications of growth for the group beyond 2030 next week?

Yes. Thanks, Ross. So in terms of down payments, first of all, it's a good progression we have seen now in the last year when we compare 9M 2025 with 9M 2024, we have EUR 200 million more down payments on balance sheet. On the other hand, I have to say we are heavily further investing into working capital. That means the strategy, and this is also seen in the figures is clearly to go for pre-investments in working capital to further deliver and outbalance this advance payments. So this is why I do not really expect an increase now of cash conversion by year-end.

And regarding 2030, yes, we will give some more insights how we think about this EUR 6 billion figure on Tuesday and also some bottom line figures for sure, and also some aspects how we think the company will grow from 2030 onwards. I think it's not a secret when you now currently look how Germany will behave from this and next year onwards that most of the contracts will not only last 5 years, they will 5 to 8 years. And then we are at the beginning in the mid of 2030. And on top of that, there will be service business due to that the availability of services of systems in Germany has to be increased massively. So there is room and there will be more details on Tuesday. Yes, clear yes.

Great. Thanks Christian, see you by next week.

[Operator Instructions] Next question comes from the line of Christophe Menard from Deutsche Bank.

Two questions on my side, just on the updated 2025 guidance. The revenue growth you have in Q4 is actually a bit softer than usual. Is it only linked to the logistical center? You're going to be growing more or less in line with what we've seen in the first 9 months. Usually, it's a stronger quarter. So the question is, is it just that phasing? And will -- should we resume kind of that accelerated growth in Q4 as of next year?

The second question is on the margin. You stated 18% plus. As you previously outlined, Sensors was doing very well in the first 9 months and in Q3. What about -- sorry, Optronics, you talked about optronics. And my question is about sensors. We also had a very good performance on sensors. How can we think about the margin performance of sensors in the full year?

Yes. Thanks, Christophe, for that. Yes, you're right. It should be a little bit weaker. I think especially in sensors, when I look at the key products such as Eurofighter and TRML-4D, there are fewer figures now planned for Q4. But nevertheless, we see an increase. I think when we talk about 2026, we will be in a normalized Q4 again, which will be stronger from my point of view because then the logistics center effect will be fully phased out next year. So this is the picture I currently have. So in terms of margin, I've outlined 14% for Optronics for this year in the sensors, I expect approximately 19%, which is then in the sum around 18% to 18.2% and which gives us confidence to reach our guidance for the full year.

Next question comes from the line of David Perry from JPMorgan.

Christian, look forward to seeing you next week. I was just going to ask you to unpick this big jump in the Optronics margin, the 14% so basically you're double year-over-year. Just how much of that is that R&D has dropped? How much of it is kind of one-off self-help, say, South Africa or something like that? And how much do you think is related to the volume? And then just to square the circle on it, can you just tell us where you think the revenue ends up for this year in Optronics, please?

David, many thanks for the question. I see currently that it's solely volume-based. So R&D, we are still in the digitalization of periscope and the WAO for the Puma. So this will last until 2027 because these figures go down. We are still at Ceretron. Ceretron is the sensor suit for the Luchs II, which has to be finished until 2027 until the first systems are to be delivered to GD. So this will stay at a high level. And as I said before, this is volume-based. South Africa is more or less on the level of the prior year. So this is exactly volume-based. In terms of revenues, I see approximately EUR 420 million to EUR 430 million for the Optronics segment. I see EUR 2.07 billion to EUR 2.09 billion in the Sensor segment, which then comes up to the group guidance.

We have a follow-up question from Sebastian Growe from BNP Paribas Exane.

So the first one is on Sensors, and it's actually then a follow-up to Christophe's question. I think if one looks at the 9-month period, then I take the point that the dilution effects from the logistical ramp-up were quite significant. But if one singles out quarter 3, then apparently it's the first quarter where you're up like 200 basis points year-on-year. So the question that I have -- it's 3 questions actually. So the first one, is this logistical ramp-up fully digested by now as we speak? And conversely, it appears really that the ESG business is performing way stronger than potentially expected. So can you provide some color with regard to the trends in the, a, core and, b, then ESG business, please?

Yes, for sure, Sebastian. So first answer is clearly, yes, we have digested that effect. Nevertheless, I see approximately EUR 10 million of effect we will have. We had this EUR 10 million effect in Q1, which is from an absolute term still in the figures. Relatively, it phases out, as you have seen through Q1, H1 now 9M and also Q4. So this is clear. And ESG, yes, we bought this company for approximately 14% EBITDA. We see currently a figure which is around 15%. So this -- the cost synergies have completely realized as we have planned on a pro rata basis. So these are the 2 figures.

Okay. That's helpful. And then just finally, again, on the order pipeline and in addition to Ross' question. So I know it's hard to compare you guys with Rheinmetall, for instance, but they hinted at around EUR 20 billion in quarter 4, another EUR 40 billion, EUR 50 billion potentially in '26. And again, I appreciate that apparently, there are differences in both the business mix, the regional mix and whatnot. But from the sort of cadence and general sort of dynamics, would the sort of potential rule of thumb like seeing a doubling or so from the quarter 4 dynamics be directionally also the right yardstick for you? Put differently, what are you seeing recently from the order pipeline perspective going into '26?

Yes. Look, I expect in 2026, especially in the land platforms where we currently talk about these thousands of Boxers, Pumas, Leopard and so on. So from my point of view, there will be big dynamics in 2026 in the land platforms also in our business. And I think the book-to-bill we currently guide for this year, I see at least also for next year. This is simply due to the fact how the structure is currently working in the German parliament with having now the budget in place 2025 and 2026. So this is my view currently. We have to keep in mind that, of course, every special land system goes then by OEMs. That means there will be a kind of a flow down process between the OEM to receive the contract. But also next year, I see in terms of book-to-bill, a figure which will be similar as the figure we have now updated for this year.

Very helpful, thank you so much, and see you next week then.

Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Veronika Endres for any closing remarks.

Yes. Thank you all for listening today. As always, should you have any further questions, the IR team is around all day to follow up. And as Christian mentioned, we are very much looking forward to welcoming you at our CMD event next week. Have a great weekend. Thank you, and goodbye.