Good morning, everyone. Welcome, thank you for joining us on such short notice. This morning, we will discuss our announcement regarding the proposed acquisition of Exail by Thales. I'm Louis Igonet, Head of IR for the firm. With me today are Patrice Caine, Chairman and CEO, and Jérémie Papin, CFO of Thales. As usual, this presentation will be in English and followed by a Q&A session. It's webcast live on our website at thalesgroup.com, where the slides and the press release are also available for download. A replay of the call will be available in a few hours. With that, I will now hand over to Patrice Caine.
Good morning, everyone, thank you for joining us this morning. We are delighted to announce this morning the proposed acquisition by Thales of Exail Technologies. This acquisition represents a compelling opportunity to accelerate Thales expansion in two fast-growing key markets where Exail is today recognized as a key player: maritime robotics and inertial navigation.
The strategic rationale of this acquisition is clear and fits the groups strategic roadmap. Firstly, we gain a critical mass to further extend our mine counter measure systems footprints, and drive to innovation in unmanned anti submarine warfare. Second, Thales' positioning in inertial navigation will be strengthened thanks to Exail's multi-platform and multi-domain expertise based on FOG, fiber optic gyroscope technology that is highly complementary with Thales' own capabilities. Finally, combining our R&D capacities will accelerate our joint quantum sensing roadmap to sustain innovation and develop differentiating capabilities over the long run.
The deal structure is a two-step process. We signed an agreement to acquire the Gorgé family's 35.51% stake for EUR 134 per share, subject to customary closing conditions. The closing of that acquisition is expected by Q3 2027. Immediately after the closing, we will file a mandatory tender offer for 100% of Exail Technologies share. Finally, this acquisition will be value creative for Thales. We anticipate significant revenue and cost synergies, notably through the mutualization of both commercial and R&D platforms. I'm now on slide four. Exail is a fast-growing tech player with leading positions, in particular in high-precision navigation and autonomous systems. Over the years, the company has been able to develop a comprehensive portfolio of solutions serving both defense and civil markets. We do value Exail's depth in cutting-edge technologies.
Thanks to significant investment in R&D and a deeply embedded culture of agile innovation among its 2,200 employees, Exail has built a broad set of high-tech in-house capabilities, from core components to products and systems. The company has notably developed recognized strengths in unmanned and navigation systems with clear differentiators in both areas, including costs and technology. Exail showed an impressive profitable growth track record over the years and generated close to EUR 500 million sales in 2025, with solid growth perspectives underpinned by a growing backlog in defense markets. Moving on to slide five. Exail has developed over the years a world-class portfolio of high-tech robotics, navigation, and maritime systems. It notably offers critical capabilities and best-in-class products in high-performance navigation and positioning systems with a particularly strong exposure to naval defense and civil maritime markets.
Since its inception in 1990, Exail also developed a wide range of recognized maritime robotic solutions, specializing, in particular, in autonomous maritime surface and underwater drones. It enjoys, notably, a strong position in the attractive mine countermeasure segment. Those two activities or businesses have been delivering strong 20%+ growth over recent years, driven by sustained market momentum and Exail's differentiating and high-tech offer.
Exail also offer a niche expertise in selected high-value components, including photonics, quantum instruments, and onboard electronics with various defense and civil applications. This business has also been delivering strong growth over recent years. Looking to the strategic rationale into more details, I'm now on slide number six. Through this acquisition, we intend to capture significant growth opportunities across key markets, seeing sustained demands while combining Thales and Exail capabilities and growth perspectives. First, the mine warfare market.
We see mine countermeasure systems as a highly strategic market with growing operational demand and a critical need to increase effectiveness. By bringing together our respective capabilities, we will achieve scale and broaden our offering with a world-class comprehensive portfolio. This will strengthen our ability to win major programs and to serve customers across the full mission chain. Second, we will drive innovation in the emerging and fast-growing unmanned anti-submarine warfare.
This market, the anti-submarine warfare market, where Thales is holding leadership position, is fast-growing and is a key priority for many navies worldwide. The move to unmanned systems is starting, allowing to reduce costs and also solve the shortage of experienced crews. Exail's technology-based products combined with Thales' broad portfolio, will provide us with additional depth while leveraging Thales' positioning and customer relationships to accelerate our ability to capture growth prospects.
Third, on inertial system or inertial navigation, Exail and Thales portfolio are highly complementary. The combination of the two will create a comprehensive multi-domain and multi-platform offer, ultimately helping us penetrate key sub-segments more effectively. This is relevant not only for defense programs, but also for broader mission needs, where accurate and resilient navigation is fundamental. Fourth, the transaction provides Thales with attractive growth perspectives.
Exail brings a robust financial track record, secured growth outlook with an accretive margin profile for Thales. The combination of our two businesses will accordingly support sustainable profitability as we scale in our markets. Finally, we will deliver significant synergies, both from a revenue and a cost standpoint. Synergies are about translating the strategic fit into measurable value creation for Thales and its shareholders. The underwater mine countermeasure market is expanding and becoming increasingly strategic. Recent events have somehow, unfortunately, confirmed that.
This market is expected to grow fast over the next decade, with high single-digit growth between 2025 and 2030, followed by low double-digit growth between 2030 and 2035. In that context, the rationale is clear. Materially broaden the offering by combining complementary capabilities. Together, Exail and Thales will leverage four key strategic assets. Number one, a global footprint with the ability to address the requirements of major countries and support customers at scale. Number two, a highly scalable platform allowing us to grow efficiently and respond quickly to increasing demand. Third, faster development of innovative services by leveraging combined expertise, technologies, and operational feedback. Number four, integrated solutions across the full value chain from components to autonomous systems, thanks to greater vertical integration that will allow us to cater to a wide range of needs from our clients.
Overall, the combination is about complementarity and growth, expanding capability, accelerating innovation, and strengthening our position in a strategic market. Unmanned anti-submarine warfare is still an emerging market, but it is scaling extremely fast. We expect this segment to grow eightfold between 2025 and 2030. The reason this combination matters is simple. Our capabilities are highly complementary, and together they give us all the building blocks to move very quickly in robotic undersea warfare. Exail bring a comprehensive range of drone platforms. Thales and Exail are both recognized sonar players, and Thales specifically had strong capabilities in ISR sensors and particularly mission systems. Together we will create a much more complete unmanned anti-submarine warfare offering. It is not just about adding assets side by side. It is about enabling new partial combinations that were not possible before.
A good example is the ability to integrate our towed sonars onto Exail DriX drones. This is exactly the kind of capability that will shape the unmanned anti-submarine warfare of tomorrow, and it is what makes this combination distinctive. We are not just broadening the portfolio. We are accelerating innovation and creating capabilities that, in most cases, no one else is currently able to offer. Now, looking on slide 10 at a critical area of our respective portfolios, inertial navigation. Inertial navigation, where we plan to capitalize on our highly complementary capabilities to further penetrate key sub-segments. Inertial navigation is more than ever a critical technology, as it is a key enabler for accurate and precise navigation without relying on any external signals such as GPS. More than that, it is a highly strategic technology in increasingly contested environments.
It is crucial for continuity of operations, for resilience and mission effectiveness. In that context, what Exail brings is a full range of multi-domain inertial navigation and subsea positioning solutions based on FOG, fiber optic gyroscope, that address and equip a wide range of platforms, surface ships, submarines, drones, land vehicles and satellites. Its offering is particularly relevant in medium to high-performance applications while leveraging strong volume capabilities. On the Thales side, we enjoy a recognized expertise in high-performance inertial navigation systems across domains, and especially in the most demanding environments.
We have a strong track record in complex inertial navigation systems in avionics, leveraging advanced technologies such as proven ring laser gyro technology. The strategic rationale here is very clear. By combining our strengths, we will strengthen a core technological capability that is relevant across the vast majority of Thales markets, with naval being a key area of expansion.
Good morning. This is Jérémie Papin, Thales CFO. Turning to slide 11, this is a detailed look at Exail financials. Exail has enjoyed a strong financial performance, posting a 20% average annual revenue growth over the past three years and a significant recovery in profit margin. The revenue growth is supported by the strong order intake booked over the past years and the gradual ramp-up of the group's production capacities, both in maritime products and in navigation systems. In Q1 of 2026, Exail published a 40% growth year-over-year in consolidated revenue and confirmed solid double-digit growth objectives. In a structurally growing market and leveraging over EUR 1 billion in backlog, Exail can enjoy further revenue growth with a significant step-up in margins anticipated in the coming years.
This is underpinned by the ramp-up of new large programs, coupled with strong operational leverage driving margin improvement and an expected acceleration in cash flow generation. Moving on to slide 12. Let's take a closer look at synergies. The acquisition of Exail and the combination with Thales' existing businesses can deliver significant synergies both on revenue and costs. First, on the revenue side, synergies will be significant for Thales. We just discussed about the product and technology complementarity between the two companies in fast-growing markets. This complementarity is breeding ground for revenue synergies. We are targeting about EUR 500 million additional sales within 10 years. That will come from significant cross-selling opportunities into Thales' installed base and programs upgrades. We will leverage our global customer reach as we have longstanding customer relationship with over 50 navies worldwide.
On the cost side, we expect to generate EUR 60 million run rate cost synergies to be achieved by 2030. This will be achieved through a deeper shared expertise in new technologies and next-gen systems, the combination of commercial networks and geographical footprint, as well as standardized product development and accelerated R&D. SG&A and procurement optimization will also meaningfully contribute to these cost synergies. In total, the contribution to Thales adjusted EBIT from both revenue and cost synergies will amount to around EUR 90 million by 2032, with further upside from revenue synergies in the following years. Moving on to slide 13. The transaction presents an attractive value creation for Thales and our shareholders. The transaction is based on a price of EUR 134 per share, implying an enterprise value for Exail Technologies of EUR 3.9 billion.
Considering the strong synergistic potential, we believe it is relevant to look at the valuation multiple post-synergies. This valuation represents a multiple of 24 x the 2027 adjusted EBIT, including cost synergies, and 20 x including both the cost and revenue synergies expected at EUR 90 million in 2032. Considering the expected growth and accretive profitability profile, this represents compelling multiple for an asset of high quality. Importantly, the transaction will be accretive to adjusted EPS in the first year post-closing. This operation fits into Thales' disciplined capital allocation. The company will maintain a solid investment-grade profile, and our expected pro forma 2027 net financial leverage should reach about 0.7x . In terms of value creation, the ROCE is expected to exceed cost of capital within five years.
Last slide number 14. In summary, with this transaction, we are creating a world-class player in robotized or unmanned or uncrewed underwater warfare with the scale, the technologies, and the capabilities ready to lead in a market that is becoming both more strategic and faster-moving. Through this transaction, given our strong complementarities with Exail, we are also building a top-tier and a comprehensive portfolio in inertial navigation, covering all key domains, applications, and platforms. Behind the strategic fit, the value creation logic is clear. This combination brings strong potential for revenue acceleration, supported by market growth and clear opportunities for synergies on both the commercial and operational sides. In short, this is clearly a strategic move that strengthens our position, broadens our capabilities, and creates a stronger platform for profitable growth.
Thank you all for your attention. We are now ready to answer any questions you may have with Jérémie. The floor is yours.
Thank you. Ladies and gentlemen, we will now start the question-and-answer session. As a reminder, if you wish to ask a question, please press star one one on your telephone and wait for your name to be announced. We will now proceed to take our first question. Our first question comes from the line of Chloé Lemarié from Jefferies. Please go ahead, Chloé.
Yes, good morning. Thank you for taking my question. The first one will actually be on the sales growth expected for Exail. You indicated 20% by 2028, you talk about synergies in 2030 and in 2032. Just wanted to check if we could kind of extrapolate that type of growth beyond the 2028 horizon. The second question is on synergies. EUR 60 million cost synergies by 2030. Should we read from this that the full cost synergy will be realized by then, and then you add EUR 30 million of revenue synergies that will flow through a little bit later? Thank you.
Yes. Good morning, Chloé. On the growth prospects, we believe that the growth momentum at Exail can maintain a strong double-digit beyond 2028, to which obviously we will be adding as they integrate the group. This is why we're giving you an indication of this acceleration by indicating that the revenue synergies at the run rate will be about EUR 500 million within 10 years. On the cost side, you are right.
Assuming an acquisition that is being closed within the second half of 2027 and a controlling stake for Thales, full control, we will be implementing and chasing cost synergies, which we believe will be achieved at a run rate within three years post the acquisition, so probably in 2030, and those would be EUR 60 million. To help you in your calculation, we gave you a five-year, 2032 outlook where you have the EUR 60 million of cost at run rate and EUR 30 million from revenue, obviously limited revenue gain in 2032. Much bigger revenue impact from the EUR 500 million of additional revenue further beyond 2032. Does this answer your question?
It does. Thank you so much.
We move to our next question. The next question comes from the line of Aleksander Peterc from Bernstein. Please go ahead, sir.
Yes, good morning, and thank you for taking my question. I just have two. The first one is if you could give us the breakup fee. Secondly, if you could give us the fully diluted share count that you use in your EV calculation and maybe the whole bridge from EV to equity value. Thank you.
On the breakup fee, we don't think this will be materializing. We will not comment on that, but it has been agreed with Exail. On the share count, Alex, we are using 17 million, but obviously as you point, there are a number of debt instruments that are linked to the acquisition price. In total, we are assuming a net debt at Exail of EUR 1.6 billion, with about EUR 2.2 billion-EUR 2.3 billion in gross debt and EUR 600 million-EUR 700 million in cash. Does this answer your question?
Yes, it does. You do count the convertibles as part of debt.
Yes.
Okay, great.
Convertibles and all the instruments including some management packages that have been put in place. There are a number of items that build up the EUR 3.9 billion of enterprise value that we are considering, and EUR 2.3 of equity value.
Okay, great stuff. Thank you.
We will now move to our next question. Our next question comes from the line of Ian Douglas-Pennant from UBS. Please go ahead, Ian.
Thank you very much for taking my question. It's great to see capital being deployed into the defence business. Congratulations. What lessons do you take from past integrations, especially from Imperva to this integration of Exail high growth, high tech business you're bringing on board, please? Secondly, with the significant synergies being discussed on this call, what measures has Exail put in place to motivate employees, especially over the next year before the deal closes? Thank you.
We can share the answer with Jérémie. Hi, Ian. Thanks for your two questions. The first one related to integration. As far as this acquisition is concerned, I really think that this one is quite straightforward. It's the core of the core business of Thales. It's defense. It's a project-based company, with R&D largely based in France, by the way, so the cultural fit is also quite straightforward with the other French defense activities that we have at Thales. We share the same customers. We share the same knowledge in terms of typically, anti-mine warfare. We are also, as we explained, as I did explain during the call, the same market in terms of inertial system, being complementary, but knowing both technologies and customer requirements.
I don't see any difficulty to integrate Exail with or within Thales. Of course, it would be important to keep its agility, because clearly, definitely it is a smaller company compared to Thales. With the example of Cobham Aerocoms, we have demonstrated our ability to integrate much smaller company within Thales, applying I would say our rigor, if I may say, but still keeping their agility, their ability to innovate fast, which is part of the value of these companies. On the second one, maybe, Jérémie?
I think, Ian, we value again at Exail, their agility, their speed. We recognize some cost competitiveness in their products, therefore, we see synergies again through R&D optimization, reallocation, obvious commercial synergies. I mentioned the procurement and some G&A savings. I think when you look at the growth profile that this business has and that the Thales businesses will benefit from, there is a lot of motivation there for the Exail teams. Once again, this is going to be an integration where we will clearly protect and nurture and feed into Thales some of the agility and speed that we can see at Exail. I hope this answers the question.
Yes. Thank you very much. Thanks for your time.
Thank you. As a reminder, before we take our next question, if you wish to ask a question now, please press star one one on your telephone keypad. We will now proceed to take our next question. Our next question comes from the line of Hervé Drouet from CIC CIB. Please go ahead.
Yes. Good morning. Thank you for taking my questions. First question is, do you see, and for you, what could be the risk you think that may reduce the chance of Thales of making that acquisition? Is there some risk you see? There has been different press release about certain disagreement with, for example, ICG, one of the financial partners of Exail Technologies about valuations.
Could you say a little bit more on how you conducted these agreements, and do you have the green light from all parties, ICG included? That's the first question. Second question is why is there, in your view, so much time? You are talking about third quarter of 2027 to finalize the acquisition. Could you maybe elaborate a bit more why that would take so much time, in your view, to get a full closing of that transaction? Thank you.
Thank you. Thank you, Hervé, and we'll share the floor with Jérémie. On the risk side, if I got your point correctly, personally, I do not anticipate, I would say, any significant risk in this transaction. We have tried to explain during the call how complementary we are with Exail. That leads, by the way, to the second part of your question. We need to, as for any file, by the way, we need to get the normal authorization from the antitrust bodies in Europe or in different European countries, depending on the threshold of the turnover we do, Exail does in these countries. Usually, our experience is that it takes, let's say, 12, 15 months. Hence, the fact that we said a reasonable timeframe is Q3 2027. This is quite, I would say, standard.
Normally, if we can do it quicker, we would be happy to do it quicker. This is, I would say, a kind of a normal timeframe to get all these authorizations. We could mention as well FDI authorizations, but it will be also quite straightforward to my opinion. This is for the first step. Do remember that there is a second step after this, let's say, Q3 2027. The fact that we would be, not obliged, but there is a mandatory tender offer that would be launched to buy the remaining shares, the floating shares outside of 35% that we would have acquired from the Gorgé family. Jérémie, any.
Yeah, this is a process that usually takes about three months.
For the tender offer.
For the tender offer. That gives you an idea of why we think we will close by the end of 2027 and start full speed integration and working closely with the Exail teams in 2028.
Mm-hmm. Could you elaborate a little bit? There's been, with this potential valuation disagreement with ICG. In the past, there's been in the press some articles about potential valuation difference view between the ICG and at the holding level at Exail holding. I don't know if there are anything you can say regarding that.
We believe it's quite straightforward from the moment there is an acquisition price that is being set. It is kind of mechanical.
Okay. Thank you.
Thank you. Once again, as a reminder, if you wish to ask a question, please press star one one on your telephone keypad. We will now take our next question. Our next question comes from the line of David Perry from JPMorgan. Please go ahead.
Yes. Hi, Patrice. Hello, Jérémie, for the first time. I've got two quick questions. I'd like to sneak one in on the other news from Friday, if I may, on the F126. Just on the Exail deal, could you just give on page five, what are the split of the sales from maritime robotics versus navigation and positioning, please? You've bundled them together. Then you've given us the sales growth for the business as a whole. It'd be interesting to have it for each product segment, if possible. Then just, if I may ask, just the charge you took on the F126 seems absolutely enormous for a single program. Can you just talk a little bit about what happened there? Thank you.
Thank you, David. I'll take the first one, I'll leave.
Exail you take?
Yeah. For Exail, they did not disclose, in fact, the split now between inertial systems or navigation and maritime robotics. The two represent 75% of the business, as we said. Can give you, let's say, a qualitative answer. Take it as a qualitative answer, as it is not, again, disclosed by Exail itself. It's roughly the same. It's roughly balanced between navigation on one hand and maritime robotics on the other side, on the other hand.
On the growth, sorry, just the growth on the different product areas?
No.
Is there?
We don't disclose so far. They don't disclose so far this split of the growth between the two, let's say, sub-segments.
Again-
I cannot be more precise, David, sorry. It's not my fault.
Again, David, we would point to the fact that Exail as a company has provided guidance and we see that being realized. That is where we will leave it at for the moment. On the F126 contract, again, it is a sizable exceptional charge. It will have no impact on our adjusted EBIT. It is a situation where we were supplying a ship builder that has faced difficulties in the program.
While we were supporting our final customer, we maintained a workload while there was a gap with cash in. Ultimately we had to take this charge. We do not have any contract that is set up in a similar way. This was absolutely the exception. Most importantly, we have not assumed any compensation in the charge we have booked, and we intend to forcefully fight for our rights, given that we have delivered and supported the final customer at all steps in this contract.
Last one. David? Thank you, David. Last one. Last question.
Thank you. Our last question comes from the line of Alessandro Pozzi from Mediobanca. Please go ahead.
Good morning, thank you for taking the questions. It looks like today is underwater day. One of your competitors also announced acquisition of four companies today. I was wondering, with the acquisition of Exail, how do you see the strength of your portfolio vis-à-vis your competitors in terms of the breadth of the portfolio, technical capabilities, and how do you expect to see your market share going forward? The second question on maybe going back to the F126, you talked about impairment, which is the only contract set up in this way. What are the lessons learned from this impairment? Thank you.
I'll take the first one, good morning, Alessandro. The first one could take a bit of time to deep dive. It's not a planned word, by the way, when I say deep dive on this market. If I try to summarize the situation, I would say the worldwide excellence of Thales is definitely recognized in the sonar business, in the sonar activity. Be it, I would say, towed array sonar, be it, I would say, a bow sonar, flank array sonar, anti-submarine sonar, a dipping sonar. We have a full range and a wide portfolio of sonar that we have sold across many, many navies across the world. Definitely it's an area of really excellence and really meaningful in this domain. You have other or complementary or adjacent segments.
We discussed typically anti-mine warfare segment, in which you need sonars by the way, but not only sonars. One of the reasons why we have decided to move on Exail, but you have also the sonobuoy market, you have many other adjacent markets. I'm not sure to which transaction you are referring to. Looking at Thales, we have definitely a very strong positioning in the wide undersea warfare market and the future merge with Exail will clearly reinforce our presence in this domain. Last point, do remember that it's not only a French activity.
We are the champion of course, based in France, but also based in the U.K., where we do supply, typically sonars for the nuclear submarine of the Royal Navy, and we are also the champion in Australia as well. We have one, and we are starting a strong position as well in Canada. Definitely our footprint, our portfolio is spread across the continent, and it's not only a purely French-based activity. That's maybe what I try to when I can summarize, it's a very good question you've raised there, Alessandro.
Yeah. I was also referring to the PathMaster, I think you launched as a clearing system for mines. Is there any feedback you can give us on that system yet?
I'm not sure I got your point, Alessandro.
I think you've launched a new mine clearance system, the PathMaster.
Yeah.
Is there any update on that product?
There is a lot of traction. This one is dedicated for what we call expeditionary mission. Of course, we have launched it because we have seen many navies willing to have, I would say, probably easier deployable system, probably a bit lighter, to pursue their mine countermeasure, I would say, missions. Of course, I'm pretty sure that we'll book contracts or we'll be able to celebrate successes in this sub-segment of the anti-mine warfare domain.
Okay. Thank you. The last one on the F126, if you could.
On the F126, Alessandro, I would say this came as a complete surprise. We had been working with the German Minister of Defence towards supporting the transfer to a new shipbuilding shipyard. We have worked with Rheinmetall, we have worked, of course, with Damen. Clearly we have been, I would say, very proactive to support the customer in all their demands, in all the different dimensions. Indeed, we have been as surprised as Mr. Papperger at Rheinmetall. It's not a question of being, I would say, introduced in Germany.
By the way, we have a strong footprint in Germany. I think all the different stakeholders were extremely surprised and as well shocked or if not disappointed by this piece of news. After a year of hard work, we transferred this contract from Damen to Rheinmetall. Believe me, I'm going to repeat what Jérémie has said, we will fight, I would say, fiercely, to, I would say, make our rights being respected and to be compensated by this, I would say, very disappointing decision. Unilateral decision from the German MoD.
Okay. Do you think it will lead to changes in how procurement is done in Germany?
Sorry, say that again.
Do you think-
The line is pretty bad. I'm sorry.
Yeah. Sorry. Do you think it will lead to changes in the procurement from German contracts?
I don't know. Too soon to say. I don't know.
All right. Thank you.
Okay. Thank you all for your questions. If you have any follow-up questions, do not hesitate to reach out to Louis and the IR team. Thanks for your presence. Thanks for your reactivity. I wish you all a very good day. Thank you, and talk to you soon. Bye-bye.