Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales Q1 2023 Results Conference Call. There will be a presentation followed by a question-and-answer session. At which time, if you wish to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. I must advise you that this conference is being recorded today. I would now like to hand the conference over to Mr. Bertrand Delcaire, VP, Head of Investor Relations. Please go ahead, sir. Yes. Hello. Good morning. Welcome, and thank you for joining us for the presentation of Thales' Q1 2023 order intake and sales. I am Bertrand Delcaire, the Head of Investor Relations at Thales. With me today is Pascal Bouchiat, our CFO. As usual, this presentation is audio webcast live and on our website at thalesgroup.com, where the slides and the press release are also available for download. A replay will be available soon after the end of the event. With that, I would like to turn over the call to Pascal Bouchiat. Thank you. Thank you, Bertrand, good morning, everyone. Before moving on to the numbers, as usual, I wanted to highlight a few items. I'm now on slide two. First, I wanted to point out that while we are not yet back at pre-COVID-19 levels, our Aero aftermarket and biometric business continue to be boosted by the ongoing air traffic recovery, which clearly showed in our Q1 numbers. The second important matter I wanted to stress is the better visibility that we now have in regard to the new LPM, the Military Programming Law in France. The LPM gives direction in term of defense spending in France between 2024 and 2030, which offer seven years of visibility for a country that represents 40% of our defense sales and is our lead customer and source of innovation funding. It draws a growth acceleration moving from 5% growth per year in recent years to 6% expected from 2023 to 2027, before reaching 7% per year from 2027 to 2030. It is striking to see that they planned significant investment in new domains of confrontation, such as cyberspace, space, or drones, in which we have strong positions. This is very positive for Thales, and it confirm the trajectory Patrice Caine highlighted in March when he said that we expected the growth to our Defense segments will move up from mid-single digit in 2023 to mid-single digit plus in 2024. Looking internally, we continue to implement our ESG roadmap with two significant milestone to share with you. Where we see the SBTi certification in March, and it's a great validation of our strong commitment in regard to CO2 emission reduction. We're one of the very first large aerospace and defense company to receive it. Second important ESG topic, anti-bribery remains paramount at Thales across our different markets and geographies, hence the importance to continue to expand the certifications to ISO 37001 standard. The certification now cover five countries which represent almost three-quarters of our sales: France, U.K., Netherlands, USA, and Canada. Let's now have a look at our Q1 headline numbers. I'm now on slide three. New orders amounted to EUR 3.4 billion, up 13% on a reported basis and 14% on an organic basis. A strong start of the year in term of commercial activity, which I will comment in further details in the next slide. Sales came to EUR 4 billion, up a solid 9.4% on an organic basis, above full-year guidance. Despite a negative scope effect, this Q1 sales represents the new record high for a first quarter. Looking to details at our order intake. I'm now on slide four. As you can see, the strong organic growth by 14% is fueled by each category of orders. Three large orders above EUR 100 million for a total of EUR 401 million. They are first two large orders in Q1, 2020. Two of these three large contracts were related to space in observation and explorations, and one contract was for an undisclosed large military customer. Orders between EUR 10 million-EUR 100 million were up by 8%. Finally, orders below EUR 10 million progressing by 17%, driven by the ongoing rebound of our Civil Aero and biometric businesses, especially in aftermarket and passport production. Turning now to slide five, looking at sales goals. First, award and currency in scope. The currency impact was not material this quarter, minus EUR 6 million. The scope impact was most significant, resulting from the acquisition and transfer activity of activities carried out in 2022. The biggest factor was the transfer of our I-IoT connectivity module business to Telit, which drives a negative EUR 97 million impact in Q1. This impact is expected to be at around EUR 360 million over the full year. On the acquisition side, we add the [bolt-on] transactions we closed last year. RUAG in Aero, ACC, S21sec, and Excellium in the Defense & Security segments, and also OneWelcome in DIS. All of that for a total of approximately EUR 60 million over Q1, and an estimated EUR 150 million over the full year. As you can see on the right, a negative impact of EUR 39 million in Q1. You should expect a similar type of impact going forward in Q2. Clearly more negative in Q3 and Q4 are as acquisitions were closed in Q2 and Q3 last year. For the full year, the overall negative impact should be around EUR 250 million. This doesn't include the expected disposal of our Aero electrical system business. The organic growth reached 9.4% ahead of the full year guidance. It was driven by the ongoing performance of the IS and the, by the [ADM] business, and was supported by a steady strong quarter in Defense. I will comment in greater detail the dynamics by business in the coming slides. Turning to the geographical perspective, a strong quarter across the board with most geographies strongly up. The only region screening negative was Australia. It didn't come as a surprise as the country is phasing down the production of the Hawkei vehicle. Overall, a strong first quarter in terms of sales. Looking briefly at each segment one by one. I'm now on slide six for Aerospace. Orders were slightly down by 3% organically. Despite two positive news. First, the two contracts above EUR 100 million space that I mentioned earlier. Also, the ongoing rebound of small orders in Civil Aero. The reason behind the slightly negative organic variations is that in Q1 2022, the total value of the two large contracts was greater than the total value of the two large contracts booked in Q1 this year. Sales were strongly up 10.2% organically, driven by the strong growth in aeronautics, including a 45% in Civil Aero aftermarket. The space business remained flat as forecasted versus a strong Q1 in 2022. Turning to slide seven, looking at the Defense & Security segment. As you can see, another strong quarter in terms of order intake, up by 31% organically with one contract above EUR 100 million versus none in Q1 2020. Also small orders nicely up high single digits. Organic sales growth was up by 5.4% organically, continuing on a positive trend across most business lines, from air defense to secure communications or marine mission system. One point that I wanted to highlight is that despite these good results, it's important to keep in mind that component shortages and supply chain tensions are still real. Nice to see and to confirm that the teams have been able to manage to grow mid-single digits despite this ongoing headwind. It's obviously a positive sign in regard to our ability to deliver the mid-single digits organic growth we committed to for the Defense business for the full year 2023. Turning to slide eight, looking at our last segment, Digital Identity & Security. At EUR 779 million, sales were up by 20.1% on an organic basis. This strong performance was mostly due to an ongoing growth in passport demands within our biometric business above expectations. Forecasting a lower type of growth for the rest of the year, this is what we need to have in mind. Also a new strong quarter for smart card businesses, still benefiting from pricing effects on top of a small volume growth. Let me remind you that these smart card businesses are a bit difficult to forecast over multiple quarters as they are short cycles. We expect growth to soften in the coming quarters and pricing in this market will even turn negative over the second half of 2023. Let me finish with slide nine and a reminder of our financial objectives. Q1 represents a steady start of the year, which allows us to confirm the financial objectives for 2023. This concludes my presentation. Many thanks for your attention, and I will now be pleased to take your questions. Thank you. Ladies and gentlemen, we will now begin 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 take the first question. One moment, please. It comes from the line of Olivier Brochet from Redburn. Please go ahead. Yes. Thank you very much. Good morning, Pascal. Good morning, Bertrand. I will have three small ones, please. First of all, on, in DIS, could you maybe tell us, when you mention price negative in H2, is it based on the orders that you've received, or is it the planning assumptions that you've made? Second question on the aircraft carrier, the PA-NG. There are press comments about the industry having to put forward some funding to help the development and then refund it later. Will that impact you? Then to what scale and when? Lastly, are you involved in any artificial intelligence development outside of defense or government projects? Thank you. Good morning, Olivier. Thank you for your three, for your three questions. First on DIS. No, it's not based on orders that we already received. It's more a global comment. I mean to say today, probably a bit more on the safe side, considering that today we might be at a peak in term of pricing. Considering, I mean, the increase in selling prices that we managed to pass to our clients throughout 2022. It's true that today, I mean, we compare Q1 2023, which takes advantage of the continuous increase in selling prices along 2022, versus the Q1 2022, which by definitions was not impacted by the 2022 increase in pricing. Now as we see, I mean, the tension in particular on electronic components in our DIS business to be progressively fixed. Also, and probably, reminding you that, at our last call, we mentioned that, we are starting to see a bit of softness in term of demand in the telco sectors, following the drop, in the sales of, electronic goods like smartphones. It's more my comment is more, I mean, to convey a message of, of care, of cautiousness. Caution. Yes. Of caution. Yes. Of caution. Relating to what might happen in the second half of 2023, where of course we will compare ourselves again, of course a lot demanding weather insights. Aircraft carrier in France, you probably refer to, I mean, probably some request from the French MoD. I mean, in particular in the new LPM, where the Minister of Defense seems to be willing to ask some companies, I mean, in particular Naval Group, to fund part of this development. It's not what we got from the French MoD at Thales, but of course, I mean, we are quite vigilant in this matter. Your last comment was about question was about artificial intelligence developments. At Thales, I tend to believe that, it's really across the board. I mean, in all our business team, whether it is the Defense, whether it's the Digital Identity Security or, you know, in our analytic and space, I mean, we are working on various projects on artificial intelligence. Maybe, a quick comment. I mean, one obvious example, which is basically how to make our water more intelligent. You know, I mean, water has to sort out, I mean, very complex situations when the tracks are in the airspace, and it is extremely useful, I mean, to develop artificial intelligence for waters to be able to self-learning systems. So this is one example, but I could mention a number of examples where, I mean, we are developing artificial intelligence. I mean, yes, I mean, artificial intelligence is part of the differentiations that Thales will provide in in most of our systems in the next in the next few years. Thank you, Pascal. Thank you, Olivier. Thank you. We will now take the next question. It comes from the line of Victor Allard from Goldman Sachs. Please ask your question. Good morning, Pascal. Good morning, Bertrand. Thank you for taking my question. I have three quick ones as well, if possible. The first one is simply on the unchanged guidance. There is a fully start to the year, and if I'm not wrong, the unchanged sales guidance implies a deterioration for the growth rate for the rest of the year. I was wondering if you could help us think about the coming quarters and possibly share with us what would make you more confident as to raise the guidance. Is that mainly DIS? If I can continue with the two next question, the other one would be on Aerospace. I was wondering if you could split out the growth that you have seen in civil, by comparing OE versus after markets? The quarter seems to have been very strong in these areas, and it would be helpful to hear how the trajectory has been so far this year compared to your initial assumption. Mm-hmm. How you think about the coming quarters in civil. Mm-hmm. Finally, a quick one on the transport deal, just wondering if you could share an update on the deal and whether the H2 timeline for closing still looks achievable? Mm-hmm. Thank you. Good morning, Victor. Quite detailed questions, at least on your first one. On the first two ones. Yes, unchanged guidance for the full year. Of course, I mean, I mean, the Q1 figure in terms of growth give us a good comfort on our ability to deliver on the 4%-7% guidance in terms of growth, organic growth. Of course, by definition, you are right, starting with 9.4% and confirming the 4%-7%, it's of course, I mean, a deterioration. And coming back on my explanation about, in particular, the DIS, you have seen that our DIS business in Q1 has been especially stronger. As I explained, of course, the more we'll move forwards, the more we'll compare our performance against a not demanding weather base. We need to be a bit vigilant on this, on this matter. Other element is that, as I mentioned, I mean, the supply chain challenge is not fixed, and we keep working very hard on this matter. Still affecting some of our businesses, different intensity, but also space in particular. We are also quite vigilant on the Civil Aero even though, I mean, the situation is improving, but still. There are still, I mean, quite significant challenges in terms of, in terms of supply chain. This is basically, I mean, our global message of a strong start, but also still being a bit cautious relating to the full year. Of course, we'll get back to you as we will release our Q2 figures. We'll see whether or not we'll adjust our sales goals for the full for the full year. At this point, it's probably a bit too early. I mean, overall your questions about Aero, the Civil Aero in particular, what I can share with you is that overall, our Aero business, but involving both, including both civil and Defense, has been quite strong in Q1. Organic growth around 20%, which is overall, I mean, stronger than expected. Let's be clear about that. In particular, quite strong in our aftermarket that grew around 45% in Q1 2023 against Q1 2020. Quite a strong growth on this, on this sector. Transport, disposal. Things are progressing as expected. Hitachi is working quite closely with the antitrust bodies. With, I mean, the appropriate level of remedy. All of that really confirming, I mean, a transactions that will take place in the second half of 2022. Okay. Thank you very much for the detail, sir. Thank you, Victor. Thank you. We will now take the next question. It comes from the line of Aymeric Poulain from Kepler Cheuvreux. Please go ahead. Your line is open. Yes. Good morning, and thank you for taking my question. My first question concerns inflationary effect in the first half. I mean, you mentioned the impact of pricing on DIS in particular. I suppose some of the slowdown has to come from the annualization of this price hike made last year. Could you give us some more granularity on the kind of pricing effect we see at DIS, but also in the other division? Also, how this impact the operational leverage, given the fact that it must also reflect some cost inflation as well. That would be extremely useful. The second question is on M&A. You want to do some more M&A in 2023. What is the progress on that pipeline? Do you see multiples coming down given the recent market jitters or are we still seeing some very punchy multiple for some of the targets you're looking at? That would be the two main question I have. Thank you. Good morning, Aymeric, thank you for your two questions. First on inflation. Maybe both. I mean, coming back on the institution of each of our three key reporting segments. You mentioned DIS. Today, overall, I think it was clear in my comments the fact that we take advantage of quite a strong level of pricing in our DIS business across all our segments, and this being the outcome of progressive increase in pricing that we put in place throughout 2022. Of course, I mean, all of the, all of that also to compensate, I mean, the increase in input costs overall. But here I'm quite positive on the overall DIS EBIT margin for the full year and very much in line with the guidance that we share with you a few months ago. The 13.5%-14.5% is really, I mean, what we've seen and that's really something that I can really confirm. On the Defense, yes, I mean, as I already shared in the past, I mean, we've got something that's three-four of our contracts that have variation of price escalation mechanism in our contracts. This is working as expected. I mean, the return of those mechanism is right in line with what we're expecting and allowing us to preserve overall our margin. All of that very much consistent with the guidance also for 2023 in terms of overall EBIT margin for this business, that should be around 13%. Here again, I mean, Thales be able to show that when it comes to Defense, whether we've got inflation or no, we can preserve our margins. Last point is probably more on the Aerospace pillars on which I mentioned in the past, this is where we were less protected on the Civil Aero avionics segments. Yes, even though, I mean, we keep negotiating with our clients to pass on increasing prices reflecting how input costs are a bit more difficult in the space business, where in the past this business was more a fixed and firm price type of business. This is where I mentioned in the past that we will be slightly affected in terms of margin because of that. Now, you mentioned, I mean, also the overall cost inflation. As you, I mean, at Thales, overall, I mean, our first cost, I mean, the cost driver is really, I mean, wages overall. Now, what was concluded, I mean, our salary negotiations for 2023, ending up right in line with what we are expecting. If I take France, for instance, overall, I mean, we are talking about overall increase in wages that is one mid-single digit. This overall consistent with the overall level inflation that we have in this country. This, of course, not taking into account the positive factor, which is the fact that as you've got people getting retired and being replaced by the young engineer, you take advantage of this positive mix effect that of course overall reduce the overall wages. Of course, not to mention also all the productivity measures that we keep putting in place. I mean, all of that very much consistent with the full year guidance in term of EBIT margin. Now, question on M&A is quite interesting. To your questions, I would say that we don't see multiples coming down. It's not the case. Again, it's not a surprise because this is also a constant message that I convey to investors. I mean, a good quality assets are, I would say, quite expensive when it comes to valuation. Of course, I mean, we keep looking at various potential targets. Of course, I mean, our primary, I mean, criteria for decisions is the first making sure and that's making sure that targets are really part of any of our suite businesses. We mentioned that we don't consider, we don't consider any transformational acquisitions. We are looking more for a target that we could just plug in within Thales in any of our global business unit very easily with quite a simple integration process. Also, I mean, key criteria for us is the potential for growth, of course, opening us, I mean, potentially new geographies in existing segments, but in countries where, I mean, today we would like to expand our positions. Lastly, of course, I mean, financial discipline, is also of course, I mean, a key criteria for us. Yes, I mean, we are considering a multiple very closely once again. We have seen in the past, I mean, some transactions that took place in our sectors, where of course when it comes to good quality assets, we, I mean, we see multiples still are quite high. Okay, thank you. Thank you. We will now take the next question. It comes from the line of Ian Douglas-Pennant from UBS. Please ask your question. Thanks very much. Yes, it's Ian Douglas-Pennant at UBS. Could we talk about Asia a bit? Strong growth in Asian orders in Q1, which I assume is Defense related, but perhaps you can correct me. Perhaps you could comment on that, and then go on to comment if there's any implications from the Australian Defense Review, and what you're hearing from Japan on where the focus will be there and whether there's opportunity for you and other European players. And then the second question is on supply chain. you know, you mentioned it's still tough. Would you say that things are getting easier? Are there any particular elements of the supply chain that you are especially concerned about at the moment? Thank you. Okay. Good morning, Ian. Your first questions, I have to confess that I don't have the answer about our Asian orders in Q1. Did we get anything very specific on this matter? That's not, I mean, obvious to me. Asia is quite important for us, and I could mention in particular, I mean, 2 countries that might not be in your radar screen, which are becoming more and more important for Thales. One is Korea, in particular for our space business. I mean, we had quite good successes in Korea in our space business. We keep pursuing opportunities in this country. Second country in Asia, which is also, let's call it a new country of development for Thales, which is Indonesia, and this on various topics. Of course, I mean, we all have in mind the Rafale prospect. Not just prospect, but a project in Indonesia. We also managed in the past, I mean, to book a nice contract on the in our space business. We're also looking for opportunities, in particular in air surveillance, air defense. As you know, I mean, Indonesia is quite a fragmented country in term of geography. It's true that our overall radar offer can really match the needs of our clients in Indonesia. I mean, to ensure, I mean the overall protections. Of the country. Korea, Indonesia, of course, on top of India, Singapore. Indonesia and Korea are probably the two most obvious countries that I can think of when I comment about opportunities in India. Australian defense, nothing very specific on this matter. As you know, I mean, Australia is second or third, I mean, largest country for defense, almost at par with U.K. No recent updates in terms of a strategic review on this, in this country. I mean, we keep seeing, I mean, the Australian government, the Australian Commonwealth willing, I mean, to keep developing a number of Defense projects. Japan for Thales is unfortunately a very small country when it comes to Defense. We sell some specific equipment, in particular in the field of radar. I have to say that at this point, Japan is not a large country for Thales in term of prospects. Will it become tomorrow opportunity? At this point, probably a bit too early. Supply chain. Supply chain, thank you very much for your question, because it gives me the opportunity to come back on this one, on this matter, and to comment where we see improvement, but where also we see, I mean, still some tensions. Where we see a situation improving, it's overall the availability of chips, in particular in our DIS business. This is probably bear in mind that this is where an intention started. That was probably two years ago. We see, I mean, really some relaxations and situations overall in terms of availability of chips really improving in this segment. It's not totally fixed, I think we are now on the on really on the positive side in term of difficulties of supply for our DIS business. Availability of chips, because we use different type of chips, the situations is a big difference in our other businesses, in particular in our Defense, but also in our Aero business, where we keep seeing, I mean, tensions in chips availability. This goes also, I mean, not just to chips availability, but also to printed electronic board. Which is the level below in terms of value chain. We take chips then to produce PC B. This is also where we see today tensions. Where we see not deteriorations, but the situations which remains a concern is more on the hardware part of our supply chain, in particular in our Defense and Space business. I think my comment is not different from the comment of other companies on this matter, but it's true that we've seen our supply chain, I mean, having some difficulties in terms of ramping up their overall production output when it comes to more of the hardware components of what we buy. This a bit across the board. It's in particular the case in Europe because we supply more from Europe. I mean, a similar situations in many countries where we see, I mean, it's a network of SMEs having some cases trouble in ramping up their overall production output. This is really a matter on which we spend time today. As you have seen in our Q1 figures, it has not prevented us to report a quite a significant growth in particular on Defense business. Still, I mean, a point of vigilance for the next few quarters. This is probably one of probably to date the most obvious limiting factor for us in term of our goals. Thank you. Mm-hmm. One moment, please. We will now take the next question. It comes from the line of George Zhao from Bernstein. Please go ahead. Hi. Good morning, everyone. I guess first, could you just provide some more color on the strong performance for DIS? You know, for biometrics, you know, where is the business? Where has it recovered, versus like, say, pre-COVID levels? Mm-hmm. You know, how much of the 20% organic growth for the segment would you consider that to be pricing for Q1? Second one, you know, following up on your comments just now on the supply challenges, you know, has that impacted your ability to deliver avionics equipment on time for new Airbus deliveries? Thanks. Okay. Good morning, George. First on DIS, I mean, first, yes, I mean, I was quite clear saying that in Q1 we really took advantage of quite a strong growth in our biometrics and in particular in our secure documents business. Really, I mean, this across the board, it's not just in a single country, but I guess, I mean, we can all testify that getting a new passport is today quite a challenge in many country. I mean, this is basically, I mean, what we see today. We take advantage of a recovery from kind of catch-up effect, following, I mean, the drop in terms of demands for passports in particular, following, I mean, the COVID-19 crisis. Second point, I mean, we keep adding quite a solid overall growth in our smart card businesses. As I mentioned, in particular in the banking area where, I mean, the level of demand is at this point is still pretty good. Now, in terms of volume price, let's consider that it probably half volume and half price. It can vary a bit across segments, but overall, I mean, this is what I can share with you in terms of split between volume and price, so 50-50 overall. Again, if... Let's be clear, today, I mean, Thales is not the limiting factor for the large aircraft producers to deliver their own production output. Even though, I mean, I mentioned, I mean, still, I mean, a bit of challenges in term of chips in this sector. We don't see Thales, I mean, Thales is not today, I mean, preventing our largest customers, our customers to deliver on their production output. My comment about mechanical parts in particular was more on Defense & Security and space much more than avionics. Thank you. We will now take the next question. It comes from Chloé Lemarié from Jefferies. Please go ahead. Yes, good morning, Pascal and Bertrand. Quite a few of my questions have been answered already, but I have a few follow-up. Maybe in Aerospace, if we could have, like, the breakdown of space versus aeronautics growth in the quarter and what you expect for the full year. Just in particular in IFE, because we've seen relatively low wide-body deliveries in Q1, so I wanted to check how that business went in Q1. The second question is on Telesat. If we could have an update on there. I was wondering if there's any risk that the new offer you submitted could require another repricing due to inflation or if we're still a matter of finalizing the financing from them. Thanks. Yes, good morning. Good morning, Chloé. Starting with the splits between Aero and Space. Overall, I mentioned that this reporting segments overall grew by 10% in Q1 versus Q1 2022. Yes, it's quite mixed between on one side, the Aero business, both civilian and Defense growing around 18%. On the other side and in space, being a breakeven against quite a strong Q1 2022. Now, IFE, it's true that overall, wide-body production has been quite low in Q1. However, we see clearly a rebound in term of orders, demands in our IFE business. This is what I started to highlight as we released our 2022 full year results. This is confirmed, I mean, we keep receiving various requests for proposal for many airlines, which means that airlines are reinvesting on IFE, by all of that being part of a global refurbishments of their cabin. I mean, we managed to book 2 large orders back in 2022 on 2 large airlines. We keep seeing, I mean, quite a strong level of demands for this business. Of course, between demand and revenue, it takes a bit of time, but yes, we start seeing, I mean, revenue in our IFE business to rebound. Now, we're still quite far from what it was, of course, I mean, pre-COVID. Overall the trajectory at this point is really, is really positive. Telesat, I mean, as always, I mean, I keep saying that it's probably more Telesat to Telesat that you should direct your questions about where Telesat stands in term of putting together their overall financing a scheme. They made a public statement on this matter as they release their their their CO. What they say is that they say that they keep making progress with the various parties they are engaged with. They remain at this point optimistic to secure the financing they need. They need to move forward with the program. Of course, I mean, recognizing, no assurance that ultimately they will be able to finance its overall funding scheme. For Thales, of course, I mean, we want to be on the safe side, and we don't want to take any inflationary risk when it comes to such a large potential project. We are quite vigilant on this matter, and in no way would we expose ourselves on inflation on this potential project. Very clear. Thank you. Thank you. We will now take the next question. It comes from the line of Christophe Menard from Deutsche Bank. Please ask your question. Yes. Good morning. Thank you for taking my question. I just wanted to come back to the supply chain issues and what you mentioned about hardware component ramp up. My question is this an issue with the funding of those small SMEs? Or is it a labor issue that prevents the ramp? That's the first question. Second question also on supply chain and bouncing back on the IFE comments you just made. Did you have any IFE systems and a pacing item at the moment, or are they not at Boeing and Airbus? The last question is on the guidance on margin. I understand that your aftermarket sales were better than expected in Civil Aero. Does it mean that it's in terms of the margin expectations for the year, we should be more looking at the higher end of the margin guidance for the group? Thank you. Okay. Christophe, good morning first. Let me start with the, I mean, the first question about supply chain and in particular on hardware components and this network of small to mid-size companies. I mean, the situation can go on, can vary across, I mean this network of small to mid-size entities. I mean, you might have companies that are struggling and can get into wide level of funding. In most cases, I mean, they are also facing labor issue. I mean, we commented in our past call about, I mean, the need for Thales to keep recruiting quite a lot, as we mentioned, I mean, Thales willing to recruit 12,000 people in 2023. I mean, the situation is pretty much the same for this network of SMEs with, however, quite a difference, which is, I mean, the attractiveness, the over attractiveness. It's of course much more difficult to attract talents when you are a semi than when you are a company like Thales. It's a combination of various factors. Labor for me is probably the most obvious one. Second is more about finding the right level of funding when it comes to, in particular, funding capital expenditure. I think that in most cases, it's more about, I mean, a labor issue. You know, I mean, getting organized as a SME, I mean, for you to ramp up might be a bit, a bit difficult in a global, I mean, regulatory environment, which is also, I mean, provides, I mean, many constraints in particular, when it comes to Defense. All of that is not obvious for SMEs. This is, this is really my message. Now, I mean, in the midterm, I don't see why, I mean, the situations wouldn't be fixed on this matter. Can you hear me? Yes. Yes, I can hear you. Yeah. Okay. Sorry, I mean, IFE, your question was. Is the limiting factor for Airbus and Boeing to grow. No, I mean, no. I mean, no, it's not, I mean the IFE component of aircraft production is not a limiting factor in terms of growth for Airbus and Boeing. No, it's not not at all. Aftermarket doing well, does it mean that Thales will deliver on the high end of EBIT margin? At this point, this is not what I want to convey as a message. We are talking about here a Q1. For me, at this point, it's really about overall and confirmation of our guidance. You mentioned aftermarket, which is doing well. It's true. On the other side, I mean, I mentioned our space business. Being exposed to inflation. At the end of the day, I mean, we've got good news, and until the time, it's true that we're also facing challenges. I mentioned also, I mean, supply chain issues. At the end of the day, when you put all of that together, my message today is really to confirm the guidance that we mentioned, which shows quite a significant increase in EBIT margin as compared to 2020-2022 11%. We confirm the guidance between 11.5% and 11.8%. Quite a significant improvement. Now it's true that overall, once again, level of demand is there. Despite all the challenges that I mentioned, in particular supply chain, we deliver quite a robust level of growth, which I imagine is good news for you. Thank you very much. Yeah. Thank you. We will now take the next question. It comes from the line of Hervé Drouet from CIC Market Solutions. Please ask your question. Yes. Yes, good morning. Thank you very much for taking my questions. Just very quick questions. First one on the transport sale. Did you receive the U.K. regulator approval? If not, is it the only one missing? Do you anticipate any remedies or compensation? Mm-hmm. Potentially for the deal? Second one is, just to check, you mentioned in the product mix a kind of impact of roughly half volume, half price. Is it overall for all segment or more specific for certain segments? Mm-hmm. Is there some segments where you have a little bit more bargaining power, especially in those where there are some scarcity, especially potentially in Defense and Aero in term of items and ramp up of productions? Finally, on DIS, you mentioned there could be some softness, looking forward because of the pricing evolutions year-on-year. I was wondering in term of uptaking of potentially, you know, new business, I'm thinking of, for example, what you are doing, for example, in cloud and in cryptography, for example, with Google. When do you expect that commercially to have an impact on your DIS business? Thank you. Okay. Good morning, Hervé. On transports, I mean, at this point, we don't get the approval from both the European Commission or the U.K. CMA. As I mentioned, I mean, the, I mean, the situation is really, I mean, moving forward in the right direction, and in particular in the nature of remedies that those two wide regulatory bodies will be asking Hitachi to deliver on. I don't want to be more specific. Once again, it's really moving in the right direction. Hitachi is working very well with those two regulatory bodies. Of course, I mean, we are supporting Hitachi, which, as you know, I mean, takes responsibility of the implementation of remedies, as foreseen in our SPA with Hitachi. All of that being consistent with the closing that would take place in H2 2022. Product mix, I need maybe to come back on my comments because I think that I was not clear enough about in particular the mix between volume and price. The 60-15 between volume and price answer was very much directed to our DIS business and only to our DIS business. I was not commenting on the other businesses like Defense or Aerospace, where, by the way, it's probably a bit more difficult, but more, I mean, taking into account what I mentioned about inflation protections in particular in our Defense & Security business. Now, I mean, at DIS, if you want me to elaborate a bit more on the various segments, overall, I mean, the 20% overall organic growth, it's of course more than that in our high growth business, combined biometrics I mentioned and cybersecurity overall. I mean, this first segment is of course growing more than 20%. On the other side, our smart card business is growing less, but still quite strongly. With quite a good mix between pricing and volumes. Smart card growth is more about pricing than volume. Overall, let's say probably something like 15%. The cyber security/biometrics is growing more than 20% in Q1, with this time probably a bit more volume than prices. That's very clear. Thank you very much. Thank you, [audio distortion]. Thank you, Hervé. Thank you. We will now take the next question. It comes from the line of Benjamin Heelan from Bank of America. Please ask your question. Morning, Pascal. Thank you for taking my question. I just wanted to come back, I think it was Chloé's question on IFE. Could you give us a bit of a gauge of how big that business was in 2022, just so we could see kind of roughly how far below 2019 it is? Then back on the avionics supply chain question. I mean, you're saying you're not the bottleneck today. Is there a significant amount of CapEx and investment you need to do to make sure that you're not the bottleneck at higher levels of production in 12, 18 months' time? How do you think about that? Thank you. Thank you. Thank you. Good morning, Ben Heelan. On IFC, what can I share with you? I mean, overall, this business back in 2019 was, I mean, around $900 million of business overall. It dropped overall, I mean, following the COVID-19, probably, $200 million-$300 million overall. I mean, both, I mean, line fit and aftermarket. I mean, we're, I mean, recovering progressively from this quite low base. I mean, it's a rebound, but once again, from quite a low level. As you know, I mean, all new projects have been canceled by airlines since the COVID-19 crisis. It's only from 2022 that we got new requests for proposal and where we started to strike, I mean, the new contract. Of course, I mean, it will take time before this business being able to recover the pre-COVID level. Of course, also, I mean, as it is more a wide body type of business, I mean, it will take, it will take time. I mean, IFC is a business where you design, but it's a business where production is quite important. Of course, it will take time before we see quite a massive increase in overall production output for this business. Supply chain bottleneck. I don't remember the question. How do you make sure you won't be a bottleneck? Yes. Yes. CapEx. No, I mean, you, you named it. I mean, the good thing overall for Thales in our avionics business, it is predominantly a business with software and what we call calculators. Those specific PC B based on the specific chips. Which means that it's not a business that would require significant capital expenditure overall for Thales to ramp up. It's not the case. Where we see more, I mean, CapEx need for overall for Thales is more in our Defense & Security business, where here, I mean, it's more. I mean, what we develop in our Defense & Security business is really system, including both software, but also a significant part of complex hardware. This is more in the hardware part that you need to invest. All of that being fully consistent with, I mean, the guidance that we provided to you in terms of increase of CapEx, moving from $520 million, $525 million CapEx in 2022 to something like $615 million in 2023, $700 million in 2024. I mean, this is, I mean, really the overall ramp up of CapEx that basically covers what I've just mentioned in term of production outputs on a production ramp up, in particular in our Defense & Security business. First phase. Also the fact that the more we grow the company, the more also we need, I mean, we need people. Despite remote working, we also need to accommodate, I mean, higher needs, I mean, to provide the right level of work environment to our new engineers. No, I mean, no specific CapEx, I mean, for Thales to ramp up on avionics production output. Very clear. Thanks, Pascal. Thank you, Ben. Thank you. You're welcome. We will now take the last question. Yes. It comes from the line of David Perry from JPMorgan. Morning. Thanks for squeezing me in. Just one question, I guess, from someone sitting in London. Can you just show me on the French defense budget, what is the date for the French parliament to approve the new defense budget? Given the current political climate in France, are you confident it will go through? Is there any risk that it doesn't get passed? Thank you very much. Thank you very much, David. I mean, I don't have a specific exact timing, but the plan, I mean, for the government is to get, I mean, the voting voted before the end of June. There are today ongoing discussion on this matter. More, by the way, about is it enough or should we spend even more? On the, on our new IPM. All of that showing that a global consensus across all political parties in France about the need to invest more and to consider that the IPM as it is today with what I mentioned, about 6%-7%, from the 2023 level, will it be enough, I mean, to serve all of the needs that the Minister of Defence has mentioned. I think the most important point is this overall global political consensus on this matter. I'm quite comfortable in this on all of that. That's very reassuring. Thank you. See you in Paris. See you in Paris, sir. Okay. I think there's, as you mentioned, there's no more questions. Maybe, as a word of conclusions, this call, I would like to stress that, yes, we do think that our Q1 2023 are pretty solid. Of course, we remain focused on the execution of our growth strategy, and of course, the delivery of our financial objectives. Our next event for shareholders is our AGM next week in Paris. Of course, as you know, the Paris Air Show is back this year. We hope to see many of you there in the third week of June. For those who will not make it there, we will be virtualing and participating in conferences in May, I mean, during Europe, Canada and USA. Of course, I mean, if you don't, if you are, if you still have additional questions, don't hesitate to reach out to Bertrand Delcaire in the next few days. Thank you very much. Have a good day. Bye-bye. Thank you. Ladies and gentlemen, if you didn't have a chance to ask your question on today's call, please do not hesitate to send your question to Thales Group Investor Relations at ir@thalesgroup.com. We will get back to you as soon as possible. Thank you all for your participation. You may now disconnect.