Thales S.A. (HO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's Thales Q3 2022 Results Conference Call. [Operator Instructions] 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' Nine Months 2022 Order Intake and Sales. I'm Bertrand Delcaire, the Head of Investor Relations at Thales. With me today is Pascal Bouchiat, our CFO. The presentation is audio webcast live on our website at thalesgroup.com, where the slides and press release are also available for download. A replay of the call will be available in a few hours. With that, I would like to turn over the call to Pascal Bouchiat.

Thank you, Bertrand, and good morning, everyone. So as usual, to start this presentation, I wanted to highlight a few key messages. I'm now on Slide 2. So first, over the past 3 months, most European countries have disclosed their 2023 budgets. Several countries such as Germany, the Netherlands or Norway are planning significant growth for their defense budgets in 2023 and beyond. Looking at our largest market, France, the defense budget is confirmed at EUR 44 billion, in line with the Military Programming Law. And the equipment budget, as you see on the chart, is planning up 8%. These announcements are fully in line with the analysis we have previously shared with you. The new geopolitical context will drive steady multiyear defense investments in Europe, making of the region one of the faster growing over the coming decade. Second, we have been quite active over the summer in terms of portfolio management. At the end of July, we announced our intentions to combine our IoT connectivity business together with Telit. This transaction would create the Western leader in cellular IoT solutions, in which we would retain a 20% -- a 25% stake. We expect these operations to close before the end of Q4, and it will drive the deconsolidations of a little more than EUR 300 million of sales. Then in September, we entered into negotiations to sell our aeronautical electrical system business to Safran, which generated revenues a bit above EUR 100 million in 2021. Turning now to acquisitions. In early October, we closed on the 2 cybersecurity acquisitions we announced over H1. On the one hand, S21sec and Excellium in managed security services, and OneWelcome in customer identity and access management. They come on top of the simulation and training business of RUAG and also AAC, the joint venture we had with Leonardo DRS and that we are taking full control of. Finally, let me stress that we now expect the disposal of the transport business to close early in 2023 once we have secured all the regulatory authorizations and completed the carve-outs. Third, we continue to leverage the sustainability impact of our portfolio working to make the world safer, greener and more inclusive. Let me mention 3 examples in Q3. First, on the greener side, Thales Alenia space reached important milestone on several environmental observations projects. Two satellites were finalized and are scheduled for launch by the end of the year. SWOT, which will revolutionize the field of oceanography; and MTG, the first of the new generation of the European weather forecasting satellites. Second example, on the inclusion side, we launched the biggest satellites we ever built, Konnect VHTS. It will help bridge the digital divide by providing the high-speed Internet access across Europe, especially in isolated regions with poor coverage. Finally, looking at biometrics. We joined major development agencies and governmental organizations to show our support for the Identity Day initiative whose aim is to increase awareness about the importance of SDG 16.9, the need to provide a legal identity for all citizens not just as a legal right but also as a practical necessity to enable access to public services. Talking about ESG, let me finish by stressing that our exit from white phosphorus effective since end of June has already driven incremental interest from investors who have previously put us on their exclusion list because of our involvement in this product. So now turning to Slide 3, which summarizes our key figures for the third quarter and the first 9 months of the year. As you can see on the slide, the commercial dynamics remained strong during Q3, with order intake at plus 36% organically, taking us to a solid 41% over 9 months. Sales over 9 months were up by 6.4% organically, supported by a strong organic growth of 8.5% in Q3 that I will comment in a minute. So I'm now on Slide 4, looking into details at our order intake. As mentioned, Q3 was again a strong quarter for us in terms of commercial activity with an organic growth at plus 36% after an already dynamic H1, taking us to a very strong EUR 15.4 billion over 9 months, up 41% organically against the first 9 months of 2021. Looking at the chart by unit value, it's worth noting that all categories, small, medium and large orders clearly progressed over the period. The strong growth was driven by both large orders above EUR 100 million and also small size orders below EUR 10 million, which increased by 14% during the period. The number of large orders increased from 9 signed last year to 16 this year. And of course, this number includes the Jumbo UAE Rafale orders signed in Q2. As usual, you can find the list of large orders in the press release. They were spread across all geographies in Defense & Security in space and also 1 in aeronautics. Turning now to Slide 5, looking at sales growth. First, a word on the currency impact, as you can see that the Q3 impact was again largely positive at EUR 126 million, reaching a total of EUR 282 million over 9 months. And we expect this trend to continue that direction over Q4. So clearly, we'll boost in terms of sales this year coming from the currency impact. On the other hand, the scope impact remain pretty small, EUR 57 million. It basically refers to the consolidation of RUAG simulations and training and also of AAC. Over 9 months, organic sales growth stands at 6.4%, mostly driven by the ongoing strong sales momentum in DIS and also a continuous robust scenario in Defense & Security with high single digits organic growth in Q3 versus the same period of last year. Turning to the geographical perspective, let me point out that growth was particularly strong in mature markets and especially in France, U.K. and also North America. So now looking briefly at each segment one by one, I'm now on Slide 6 for Aerospace. So our orders were slightly down, as you can see, by 3% organically, but mostly due to the impact of the jumbo contract related to Galileo last year. The commercial activity remained strong in Q3, which included 3 large orders over EUR 100 million. In Space, one for the next tranche of frequency, the Italian Military Satellite Program, and one for our commercial satellite with the Korean operators, KT SAT. In Avionics, also one in IFE for the A350 contract with Emirates. Sales were organically up by 2.1% over 9 months. And as mentioned at H1, several factors continue to explain this slow growth. First, the loss of sales to Russia is mostly recorded in this segment. Second, both Space and Microwave Tubes were still facing high comps. Let's keep in mind that Space recovered strongly last year. It was organically up by 27% over 9 months. And third, while civil avionics aftermarket continue to recover quite strongly, the global wide-body OE markets remain very weak and were 60% lower than in 2019. Let's also keep in mind that both Avionics and Space continue to face ramp-up challenges in regard to supply chain delays as well as recruitment challenges. Now turning to Slide 7, looking at the Defense & Security segment. Order intake remained strong, up organically 86% over 9 months. Of course, thanks to the support of the jumbo Rafale UAE orders signed during H1. However, Q3 remained also quite dynamic commercially with one large contract over EUR 100 million signed for SeaFire radar to a non-European MOD, confirming the competitiveness of this new technology. With a total of 9 large orders above EUR 100 million since the beginning of the year, Defense & Security is further strengthening its future growth with a new record backlog of more than EUR 29 billion. Organic sales growth remained also solid at 5.2% over 9 months, confirming its sustained mid-single-digit trajectory. Among the many activities behind this growth, I can mention Rafale programs, radios and embedded and tactical communication systems, informations, command and intelligence systems and integrated airspace protection system, and all of that despite Hawkei program phasing down in Australia. Now turning to Slide 8, looking at our last segment, Digital Identity & Security. As mentioned previously, order intake at DIS is structurally aligned with sales for both businesses as they operate on short cycles, hence, no need for me to comment. At EUR 2.6 billion, sales were up at a strong 16% organically. The H1 performance extended into Q3 in spite of ongoing supply chain challenges. Cybersecurity continued to deliver robust growth, double-digit organically over 9 months, driven by our Encryption business, where Thales is a clear leader worldwide. Biometrics continued to recover also at double-digit organic growth over 9 months and against a minus, so that rebound in biometrics started during Q4 2021. So hence, organic growth is expected to slow down at the end of the year due to higher comps. And finally, the smart card businesses, both EMV and SIM, still performing strongly mostly due to pricing effect, which, of course, is a positive effect for Thales this year but also a difficult parameter to forecast, hence, a bit of prudence when it comes to 2023 and the outlook of the smart card businesses. So all of that's bringing me to the final slide, Slide 9, with an update on our 2022 financial objectives. As you understood, Q3 order intake is in line with our expectations. And we have a solid pipeline of orders for Q4, which allows us to confirm our full year order intake target, namely a book-to-bill ratio significantly above 1. Our sales dynamics remained strong even if they are differentiated across our 3 segments, as you saw in the previous slide. And we are now expecting to be in the upper part of the 3.5% to 5.5% guidance range. You will notice that as we update the scope and foreign exchange rate, the sales guidance range mechanical increases by around EUR 100 million to EUR 17.2 billion to EUR 17.6 billion. This doesn't change our EBIT margin guidance. So many thanks again for your attention, and I will now be pleased to take your questions.

[Operator Instructions] And the first question is from the line of Daniela Costa from Goldman Sachs.

Can you hear me?

Yes.

Pascal, this is Victor Allard from Goldman Sachs on behalf of Daniela Costa. So potentially, if I may, 3 questions. The first one would be on transport. And we have seen earlier this month newsflow pointing to the potential risks around the deal going through with the CMA potentially considering whether the deal could harm competition. And I was wondering if you could please provide us some color on the deal and the sort of confidence that you have on this going through. The second question would be on Aerospace and if you could please give us more color on the sort of challenges that you're facing in the division. You mentioned the impact of Russia and the slow recovery in wide body. I was wondering if you could please perhaps like provide us more color as regards to the other segments. And the last question is on labor and wages and probably framing my question in 2 parts. First would be on the labor ramp and how you're tracking in terms of your hiring so far this year versus your plan. And the second part of the question would be on wages. And as we approach the annual salary negotiation, I was wondering if you could please provide some reference points for labor costs into next year.

Okay. Victor, thank you for your 3 questions. So starting with transport, I mean the carve-out is progressing pretty well. And now from a regulatory standpoint, I mean, we are progressing. I mean the file is today under review by the opening commissions and no specific concern on -- in our view. And all of that, I mean, in line with closing that we expect in early 2023, so my view probably would it be end of Q1, yes, probably the most likely scenario today is in Q1, I mean to complete this transaction. So no specific concerns on those 2 matters. Aerospace, so yes, I mean, I commented some drivers which constrains overall, I mean, our growth in this segment. Yes, I mean in particular, in Russia for these specific segments in terms of -- which is safe represents EUR 70 million on an annual basis. And this, I mean, reflecting the fact that we cannot continue operating in this country, both from a space standpoint but also from avionics standpoint. So this is the first point. Second point, it's also true that we are also -- in this segment also meeting us, by the way, in any other segments some challenges in terms of supply chains, I mean, specifically on microchips. Last point is also, I mean, when you look at the overall level of top line growth in these sectors, you should also consider that specifically on Space, I mean, 2021 is clearly quite a high comparison base. You probably remember that Space recovered quite strongly in 2021. If I look at the first 3 quarters in 2021, overall, the growth last year was around 27%. So of course, I mean this year is, of course, quite limited considering this quite high level of performance. So those are the elements. Maybe last point is about the fact that, yes, I mean, the wide-body market is still quite sluggish and, in particular, is driving our IFE level of revenue, which is quite low, which remains very low, as I mentioned. Today, I mean this IFE business is 160% below what it was in 2019. Now on the positive sign, because there are also quite positive sign, we keep seeing quite a strong level of recovery on both the OEM single aisle segment. But also the overall aftermarket, overall, I mean, aftermarket is doing quite well with overall a level of growth which is above 20% by the end of September. So you see quite a mixed situation. The good thing is that we keep seeing quite a strong recovery in the overall single aisle segment, whether an OEM or on the aftermarket. On the other hand, it's true that the wide-body and, in particular, driving our IFE business being quite -- still quite sluggish. Last question was about labor and wages. So first, on -- in terms of recruitments, we're widely in line with the overall, I mean, guidance that we provided to you with regard to the number of recruitments that we'll achieve for the full year 2022. We said that it would be around 11,000 new recruitments in 2022. Looking at the situation, end of September, we recruited 8,700 new employees at Thales. So our run rate, which is very much in line with the 11,000 recruitments that we need to complete for the full year 2022. Last point is about annual salary. Yes, I mean we are expecting an annual salary negotiations to start probably mid-November. And of course, at this point, it is probably, I mean, too early to mention any specific point on this matter. I think, however, in mind that looking at the overall, I mean, level of salaries -- I mean, the overall salary level overall at Thales, which represent EUR 8 billion, half of that relates to our French footprint. And it's also important to have in mind that today, France is a country where we see the lowest level of inflation, the overall lowest level of CPI. So of course, I mean, annual salary negotiations will be quite an important topic, of course, with, of course, I mean, impact in 2023. That will be quite substantial. However, I mean relative to our peers, relative to our competition, I don't see us and in particular with this, I mean, French footprint that I've just mentioned, relative overall position, which in my view, remain pretty favorable.

We'll now take the next question. This is from the line of Benjamin Heelan from Bank of America.

Two from me. Going back on those comments you just made around supply chain, are things getting better in the supply chain? Or do you think things are still tough or are they getting worse? Could you just give us update if things getting better or not. And then second question on DIS. Obviously, it was very, very strong in Q3. How should we think about that trending into Q4 and into 2023? Is Q3 a pull forward because it was -- it was over 20% growth. Should we be thinking teams growth into Q4 and into 2023? Just interested. Are there any one-offs in that number or are those trends what we should be thinking about through the next 12 months?

Yes, Ben, so I mean 2 important questions. Supply chain, I mean, do we see things improving or deteriorating, I tend to believe that it is stabilizing. But we still -- I mean, some concern about, I mean, the -- I mean, what it means and the level of vigilance, the time we spent on this matter, I mean, in order to keep it under control, which is really the case. I'm quite convinced it will continue to be very much under control considering everything we do on this matter, which is essentially, I mean, anticipations and it's true that we spend a lot of time tracking, I mean, any ability for us to make advanced supply whenever we think it makes sense. Also, it's quite important how to diversify our source of supplies. But also, I mean -- and based on our in-house design capability, began to replace, in some cases, whenever possible, one chip with another one that would be more easily accessible. And last point, which is quite also important, what we have done in the last 12 months is once we get the chips, how can we go quicker in terms of integrating those chips in our final products for us to deliver on time to our clients. So you see, I mean, a number of actions that we keep working on with also our view, it's -- how should we think about the midterm future not just in 2023 because we know in 2023, the situation will continue probably to be tight. But considering that how should we protect over the midterm, should we consider more, I mean, midterm commitments vis-a-vis some specific suppliers, so this is the type of questions that we are asking to ourselves. Making a long story short, quite, in my view, stabilizations, but a permanent challenge and vigilance today at Thales, and we think that this will continue throughout 2023. DIS, so quite a strong level of growth in Q3 in particular. We think that Q4 will be more demanding account base as, in particular, I mean IBS -- excuse me, our biometrics secure documents business line really started to recover in Q4 last year. So basically, I mean, Q4 on this specific business, of course, will be, of course, less impressive than what we have seen since the beginning of 2022. A point which is -- on which, I mean, is at this point a bit difficult to have a clear view is the level of demand considering, I mean, the slight recessions and, in particular, in the overall telco business. At this point, we have not seen any input from our clients suggesting a drop in the level of demand for the telco business, by the way, pretty much the same on the banking account activities. However, it shows that it's a point of uncertainty, in particular, relating to 2023, we -- it's quite obvious that in case we see a downturn in terms of [Technical Difficulty] level of demand in particular on smartphones, it's likely that there will be probably, I mean, effects on the level of demand for SIM cards. So a bit of vigilance on these matters. Third point, which will be also quite important, but at this point, just I mean reflections, will we see the cheap market starting to ease a bit sometime in 2023? Will we see a drop in prices on chips? At this point, this is not what we have seen, in particular, on those chips that we supply at Thales. But here again, I mean, a point of uncertainty. All of that, meaning that Q4, we've got today quite a good level of visibility. We know that Q4 organic growth in DIS will be lower than what we have reported so far, in particular, linked to the biometric comparison base. Now when it comes to 2023 and in particular as from Q2 2023, it's probably a bit too early now to guide you. I mean that's something, of course, we'll be able to come back to you probably as we release our 2022 figures. But today, I mean, this is a short cycle flow business. And we know that, I mean, the level of demand, the overall pricing dynamics can change quite quickly. Now once again, at this point, no data point suggesting, I mean, a drop in the level of demand or -- and pressure on selling prices.

Okay. Great. A quick follow-up. You mentioned higher prices for DIS. Is this a whole portfolio that's benefiting from higher pricing? Or are there particular elements, biometrics maybe, cyber, that are the real drivers of the price improvements that you've seen?

No, it's not specifically cyber. It's across the board, maybe with exceptions of the biometrics/secure documents, where we operate more on the long term, I mean, fixed price type of contract. But the rest, whether it is EMV, telco, cyber, I mean, we have seen quite a strong pricing -- so it's not limited to cyber, it's really, I mean, most of our portfolio including our banking and also our telco businesses, which have done pretty well throughout 2022 in terms of price increases, I mean to pass to our clients, I mean, higher input costs.

We'll now take our next question. It is from the line of Aymeric Poulain from Kepler Cheuvreux.

The first question is on the book-to-bill and slight slowdown in Q3. Given the seasonality of your order intakes, what's your best guess? You guide for above onetime for book-to-bill, but you are 1.2 or slightly above that for the year. So do you expect a slowdown given the comps of last year? Or do you see continued momentum on the order side for the rest of the year. That's the first question. And the second question is to come back on the pricing power and the difference between aerospace and digital with a significant contrast. So could you -- and you maintained obviously your guidance for margin despite the stronger sales momentum. So could you elaborate on the impact of the fixed price contract and the inability to pass on inflation on the aerospace on the margin? And of course, on the digital, should we assume a much higher margin as a result and how sustainable this is for 2023?

Okay. Aymeric, so starting with book-to-bill, I mean, first, I think it's very important we need to have in mind that, I mean, order intake in a company like Thales is always a bit bumpy across quarters. In particular, when you book, I mean, some large contracts, can move from one quarter to the other one. So volatility, which is inherent to our business. Now overall, I mean, the trends throughout 2022 has been quite positive. And what was seen in 2022, maybe as compared to what happened in the last few years, is probably more order intake until the end of September, it's true that when you look at 2021 -- 2020, 2021, we are seeing a very large portion of our order intake being booked in Q4. This year, it would be probably more linear or, I mean, a bit less of twisted, I mean, to the end or back ended, as we have seen in the past, which is, in my view, pretty good. So overall, I mean, how will we end up, I mean, when looking at the consensus, today I'm quite happy with the level of order intake, which is today in terms of consensus and which is, in my view, quite a good illustration of what it means a book-to-bill which is -- which will be significantly above 1. So pricing power. So of course, I mean you mentioned 2 businesses which are quite different, DIS and the aerospace. So DIS, I mean, even though, I mean, there is no specific clauses in most of our contracts, I mean, to protect us in terms of being able to pass high input cost to our clients, I mean, we have seen in 2022, I mean, this ability to exercise pricing power in a market which has been quite disciplined. And in a market where, of course, I mean, the scarcity of chips also help in increasing the prices. I mean, what will it mean in terms of margin for 2022 for DIS business, you probably have in mind that in the road show, I was quite confident that as early as 2022, Thales DIS should be able to be in the range of level of EBIT margin that we announced back in 2019 for 2023. And this range was 12.5% to 13.5%. And my view is that we should be able to be in this level of range as early as 2022, so a year ahead of our commitment. Now how sustainable is it for 2023? It's probably a bit too early at this point. But I'm quite confident, I mean, to -- I mean, 2023 to have the highest business holding quite firm in terms of overall level of EBIT margin and, in particular in the lines that I've just mentioned. So aerospace is a bit of a different story. As I explained many times, Aerospace is more a want of fixed and firm prices. And where, of course, I mean, the ability to pass to our clients increase input costs is more difficult than in other businesses. And in particular, in our DIS or our Defense & Security businesses. So yes, I mean, there will be an impact in terms of EBIT margin in 2022, 2023, but all of that is in my view fully consistent with, I mean, the fact that we have reconfirmed the overall guidance in terms of EBIT margin, the 10.8% to 11.1% for 2022. Now of course, I mean, we keep working hard in our Aerospace business, first, I mean, to pass increase in prices to our clients, and there are ongoing discussions, negotiations with various clients. Of course, I can't be more specific on this matter. And second point, which is also quite important, it's -- in particular in the world of space, in the past, the world of space was a world of fixed and firm prices, almost all contracts are being based on fixed and firm prices. And it's true that considering the level of inflation, all the bids that we submit today, I mean, takes into consideration, I mean, this overall inflationary environment for us to be able to protect our midterm margin on this specific space business.

Next question is from the line of George Zhao from Bernstein.

Going back to your revised sales guide, does that assume any changes in currency or scope? Or was that purely driven by the organic growth moving to the higher end of the guide you had before? And secondly, in the coming -- I know a lot has been asked about pricing within DIS. But within the price increases for smart cards, are they leading to better profitability? Or are they fully passed through of the cost that have increased such that there's no or little profit benefit?

George, I will start on your question about DIS and in particular on banking and smart cards. What we are seeking to do at least is, of course, to compensate any higher input costs and to preserve our margin. Now, I mean, we are also looking to do, in some cases, even better. And today, overall, my view is that when it comes to our EMV overall telco business, we are doing a bit more than just preserving our level of margin. So this is basically what we're striving to do, and it works pretty well. Once again, in a situation where, I mean, the level of demand remains quite strong but with also, as you have understood also, I mean, clearly a shortage in terms of supply, which also means that we also ensure that we serve our best customers the best way we can. And this is also in such a situation where our clients really perceive what it means to have a long-term high-quality relationship with a supplier like Thales because I can tell you that we see them in telco, I see bank that are keen, I mean, to be served in due time despite this overall quite a difficult environment from a supply standpoint. And of course, I mean, reliability of supply, reliability of quality, it also means we need to be rewarded when we manage our customers in such a way. So overall, I mean, we are striving to expand our margin in this overall inflationary environment. Now your question is about our 2022 guidance. So we have -- and what is in our view quite important is really the comments and the fact that today we consider that we should be in the upper part of the guidance that we provided in the past, this 3.5% to 5.5% organic growth. Today, I mean, we believe that we should be in the upper part of this range, and it is a little bit new. Now it's true that in terms of absolute level of revenues, we have also adjusted our level of -- sales level for 2022, also to reflect, I mean, the impact of a stronger U.S. dollar. And this is bringing something like EUR 100 million of additional revenues and also a bit of scope effect, I mean, following the consolidations of a few small site businesses throughout Q3 that I've just mentioned at the outset of my presentation, in particular, our 2 new businesses on cyber, 1 being the S21 Excellium managed services businesses that we acquired and which we closed the transaction in October. And the second being the small size OneWelcome customer identity and access management businesses that we closed end of September.

So in other words, the $100 million addition to your sales base purely from currency and scope, not from moving the organic growth?

No, it's clearly, I mean, the currency effects.

We'll now take our next question. It's from the line of Chloe Lemarie from Jefferies.

I have a couple. The first one would be to come back on the comments you made on the impact of demand from the recessionary environment on the different businesses. I understand that SIM cards obviously could see an impact there. But just to come back on the bank cards, would those typically align with the macroeconomic cycles or would you have some new products or other specific cycles that could offset this in 2023 and any other specific businesses that you see more at risk of that recessionary environment. The second question would be on FCAS and the Phase Ib contract. If it is signed indeed later this year, what could this represent for you in terms of order intake? And could it trigger some revenue recognition even if it's signed towards the very back end of the year?

Okay. I have to say, I mean, the line was not great, and it seems like you are in a noisy environment. So I'm not sure that I got all the questions, I mean, starting with FCAS, so I don't want to make specific, I mean, comment on FCAS nature. What I can say, however, is that in case, I mean, FCAS moves forward, of course, we should get a positive effect for Thales, which, in my view, will be more in 2023 than in 2022. And what is known being the Phase Ib of this contract, where, as you know, I mean, Thales will get -- I mean, we'll be involved on 2 matters, one being the overall sensors, I mean, part of the program, which is quite significant for us; the second one being about the overall collaborative combat, which is also, I mean, where, I mean, we'll get the business. Now, when I look overall at the 1b phase, so order intake 2023, but overall, I would say it's not a major contract for us in terms of size, once again, for this specific 1b phase tend to believe it's part of the -- which is normal defense business order intake that we'll get in 2023. So you shouldn't consider that from an order intake standpoint and from a revenue standpoint, I mean, FCAS in 2023 should be something that would be, I mean, that significant. Your first question was about, if I understood well on the recessionary environment and, in particular, where we could see, I mean, some impact. So overall, my view is that, I mean, probably Thales is one of those few companies with quite a strong level of resilience when it comes to impact of all global recessions. And the reason is, I mean, we don't see in the short term any impact of recessions in, in particular, Defense & Security business and probably quite a modest impact also on our Aerospace business. Where we could consider impact is, yes, on our DIS business. And my view is, specifically on the telco business, as I mentioned, of course, I mean, lower sales on smartphones will result probably in lower level of demand when it comes to SIM cards. Our banking business, in my view, should be more preserved because here it's more a mechanical renewal of cards. And I don't see, I would say, a significant impact of recessions and the level of demand on this business. Cyber, yes, but overall, the underlying very strong drivers for growth on cyber that I'm not specifically concerned about the impact of recession on our cybersecurity business. So overall, you see that I'm quite positive overall and considering that we should be well protected, the level of resilience Thales against recessions, in my view, will continue to be quite strong.