Indra Sistemas SA (ISMAF) Q1 2025 Earnings Call Highlights: Strong Defense Growth Amidst Mixed ...

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Wed, May 7, 2025, 1:01 AM 4 min read

Backlog Increase: 11%, reaching EUR8 billion.
Order Intake Increase: 17% year-on-year.
Revenue Growth: 4% overall, with 18% growth in defense.
EBITDA Growth: 7% year-on-year.
EBIT Growth: 6% year-on-year.
Net Income: Decreased by 3% due to higher financial costs and taxes.
Free Cash Flow: Increased by 14% to EUR77 million.
Net Cash Position: EUR129 million as of March 2025.
Defense Order Intake Growth: 27% in the quarter.
Defense Revenue Growth: 18% in the quarter.
ATM Order Intake Growth: Over 40%.
ATM Sales Growth: 6% increase.
Mobility Order Intake Growth: 73% increase.
Minsait Revenue Growth: 1% increase, with a 5% growth excluding elections impact.
EBITDA Margin: 10.7% overall, 18% in defense, 16% in ATM, 7% in Mobility, 7.9% in Minsait.
EBIT Margin: 8.2% overall, 15% in defense, 13% in ATM, 4% in Mobility, 5.6% in Minsait.
Net Financial Debt: EUR129 million, improved from EUR86 million at the end of 2024.
Debt Cost Reduction: Reduced to 3.4% from 4.2% at the end of 2024.
Cash Position: EUR781 million at the end of the quarter.

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Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Indra Sistemas SA (ISMAF) reported a strong start to 2025 with financial results aligned with annual objectives.
The company's backlog increased by 11%, reaching EUR8 billion, and order intake rose by 17%.
Free cash flow grew by 14% year-on-year, reaching EUR77 million.
The defense sector showed significant growth, with revenues increasing by 18% and order intake up by 27%.
The company is executing its 'Leading the Future' strategy, including a new organizational chart and industrial plan to enhance product and manufacturing orientation.

Negative Points

Net benefit in the first quarter dropped by 3% due to higher financial costs and taxes.
The defense business experienced a decline in EBIT margin year-on-year, attributed to increased fixed costs and amortization.
The mobility sector's sales were flat, with declines in America and EMEA offsetting growth in Europe and Spain.
The elections business saw a significant drop in sales compared to the previous year, impacting overall revenue growth.
The company faces potential impacts from tariffs, estimated to be EUR3 million to EUR4 million.

Q & A Highlights

Q: Could you explain why the defense margin was down year-on-year despite a positive mix, and what should we expect in the coming quarters? Also, could you provide insights into the expected order intake in defense for 2025 compared to 2024? A: (Jose Vicente De Los Mozos Obispo, CEO) The operational margin grew by 2.7% but was impacted by higher amortization costs. The EBIT margin improved due to lower operational expenses. As revenues increase throughout the year, margins are expected to improve. Regarding order intake, we anticipate doubling the figures from 2024, driven by the Spanish government's defense programs. We are preparing to lead in areas like defense systems and radars.

Q: Do you expect any impacts on your business from recent tariffs, and how will the increased defense budget affect your business this year? A: (Jose Vicente De Los Mozos Obispo, CEO) The impact of tariffs is expected to be low, around EUR3-4 million, as we have localized production in the U.S. The increased defense budget will primarily affect order intake this year, with significant sales impact expected in the following years. We are preparing for sustainable growth by reinforcing engineering and M&A activities.

Q: Can you discuss the outlook for the elections business for the rest of the year and Minsait's priority geographies for potential M&A? A: (Luis Abril, Managing Director, Minsait) We expect the elections business to generate EUR55-60 million in sales for 2025, similar to 2024. For Minsait, we are focusing on consolidating our presence in key geographies like Spain, Chile, Portugal, Brazil, Mexico, and Colombia. M&A will target complementing our product portfolio and enhancing digital capabilities.

Q: What is the status of the potential acquisition of Escribano Mechanical and Engineering, and how will it be managed given the chairman's ties to both companies? A: (Miguel Forteza Garau, CFO) We are in the initial phase of evaluating Escribano, among other companies, for potential acquisition. The board is informed, and we are ensuring compliance with corporate governance rules due to the chairman's conflict of interest. Escribano could enhance our manufacturing capabilities and vertical integration.

Q: What are your expectations for the EBIT margin in the defense business for the rest of the year, and do you foresee reaching your strategic plan targets through organic growth or M&A? A: (Jose Vicente De Los Mozos Obispo, CEO) We anticipate margin improvement as revenues increase throughout the year. Our strategic plan targets are achievable through both organic growth and selective M&A. We are preparing for long-term growth, aiming to reach EUR10 billion in sales, supported by a strong financial position and cash generation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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