Leonardo S.p.A. — Investor Presentation 2023

Jul 28, 2023

2Q/1H 2023 Results Presentation

Rome

28 July 2023

• Q&A

Agenda

• Sector results
• Appendix

• Key messages Roberto Cingolani, Chief Executive Officer

• Financial review Alessandra Genco, Chief Financial Officer

CEO Introduction

A great knowledge-based company with strong market position

• Leader across Helicopters and Defence Electronics
• Key player in international cooperation programmes
• Well positioned in key domestic markets
• Leading portfolio offering across the businesses
• Solid H1 performance; reconfirming FY guidance

Confirmed key pillars for creating value, deleveraging and improving cash flow generation …

…but this is also the right moment to think about the future

A new era of defence

Understanding how to best support our clients in fulfilling their future needs

• Changing nature of the conflict as demonstrated by the war in Ukraine
• Bytes instead of bullets
• Concept of conventional defence evolving into National Security
• Leonardo's technology leadership to be boosted and accelerated to adapt to global changes underway

Leonardo's product portfolio and the company positioning in the international geopoliticalscenario will have to evolve

Building the Leonardo of the future

Evolving product portfolio and positioning to meet geopolitical developments and technological transformation

New era of defence and technological transformation Understanding customer needs in 10 years from now Geopolitical and strategic positioning Leaner and stronger organisation Products/technologies for the future • More international • Leveraging existing strong businesses • Expanding into complementary and synergistic businesses • Complementary and strong Leadership Team in place • New Co General Manager • Clear strategy of attraction, retention, and development of talent • Massive digitalization to boost core products • Supporting communities to face global changes • Stronger and more focused R&D activities

An innovative and agile business that is strongly positioned for growth

Reinforcing and strengthening the core products

More recurrent revenues, higher margins and low capex requirements

© 2022 Leonardo - Società per azioni

SERVITIZATION

Making Space and Cyber strategic priorities

• Total market value of ~\$350bn (~70% services and Ground equipment)
• Estimated to reach a value of ~ \$1tn in the next decade

SPACE CYBER

• Cumulative market value of ~ €700bn between 2024-28

• Estimated segment growth of 8% CAGR 2024-2028

LEONARDO TODAY

OUR ROADMAP

• Operates through JVs and Electronics Division
• Present in the main space programmes (e.g. Prisma, Copernicus, Galileo, …)
• Leverage key assets to strengthen the offer of value-added services
• Work on application domain of new technologies
• Drive growth through digital transformation
• 4 capabilities: Secure Cloud & Data Valorisation, Global Monitoring & Transportation, Secure Communications, Cyber Security & resilience
• Upgrade existing products with a cyber by design approach over the entire lifecycle
• Natively embed Cyber in new programs
• Address evolving defence and institutional customer needs
• Serve civil markets leveraging secure cloud and data valorisation platforms

Key takeaways

• 1. Strengthening the core business
• 2. Making the organisation more efficient
• 3. Optimising the product portfolio
• 4. Growing international presence
• 5. Improving cash generation and profitability through new high-tech service based products
• 6. More focused R&D to drive our transformation in an evolving environment
• 7. Targeting new business in Space and Cyber security domains helping to ensure increased cash conversion

This will be presented in the New Strategic Plan, to be delivered at the beginning of 2024

-

• Q&A
• Sector results
• Appendix

• Key messages Roberto Cingolani, Chief Executive Officer

• Financial review Alessandra Genco, Chief Financial Officer

1H 2023 Highlights

• Strong commercial activity
• Continued strong demand for our products driving top line growth
• Solid profitability across all divisions
• Stepping up FOCF
• Confirming deleveraging path

	1H2022A	1H2022 Adj.1	1H2023	% Δ1
ORDERS (€bn)	7.3	7.2	8.7	+21.4%
REVENUES (€bn)	6.6	6.5	6.9	+6.4%
EBITA (€mln)	418	407	430	+5.7%
FOCF (€mln)	-962	-973	-517	+46.9%
NET DEBT (€bn)	4.8	4.8	3.6	-24.1%

1) Adjusted perimeter to exclude the contribution of Global Enterprise Solutions

Order Intake

Commercially strong, reflecting continued strength of defence-governmental business

	€ mln	∆ % YoY
1H2022A*	7,161
HELICOPTERS	2,805	+28.5%
ELECTRONICS EUROPE	3,045	+19.9%
LEONARDO DRS	1,339	+15.6%*
AIRCRAFT	1,497	+0.5%
AEROSTRUCTURES	225	+42.4%
ELIMINATIONS & OTHER	-220
1H2023A**	8,691	+21.4%

* Adjusted perimeter to exclude the contribution of Global Enterprise Solutions

** Including ca. €44 mln of negative forex

Revenues

Solid performance confirming growth path

	€ mln	∆ % YoY
1H2022A*	6,480
HELICOPTERS	2,160	+2.4%	Increase due to dual-use models, CS&T despite expected lower contribution from NH90 Qatar
ELECTRONICS EUROPE	2,198	+4.2%	Growing volumes in all business areas, mainly in Cyber and Defense Systems
LEONARDO DRS	1,107	+6.8%*	Increase on the IM-SHORAD and MFoCS programmes
AIRCRAFT	1,348	+6.9%	Mainly driven by Euromale and JSF
AEROSTRUCTURES	327	+39.7%	Driven by ATR and B787 production rate increase
ELIMINATIONS & OTHER	-246
1H2023A**	6,894	+6.4%

* Adjusted perimeter to exclude the contribution of Global Enterprise Solutions

** Including ca. € 30 mln of negative forex

EBITA and Profitability

Improving Profitability

	€ mln	RoS	∆ % YoY
1H2022A*	407	6.3%
HELICOPTERS	157	7.3%	+4.0%	Solid performance driven by top-line growth
ELECTRONICS EUROPE	225	10.2%	+7.1%	Confirming strong profitability in core divisions
LEONARDO DRS	84	7.6%	-9.7%*	Lower profitability, as expected, due to business mix. 1H22 Columbia-Class profit step up
AIRCRAFT	160	11.9%	+6.7%	Strong profitability driven by EFA
AEROSTRUCTURES	-72	-22.0%	+18.2%	Higher asset utilisation from increased production volumes
ATR	-5	n.a.	n.m.	Lower contribution due to a one-off customer settlement in 1H22
SPACE	2		n.m.	Substantially flat YoY. Positive trend in Service.
CORPORATE & OTHER	-121		-9.0%	Manufacturing affected by Telco Business. Continued to be impacted by production delays due to persistent supply chain tension.
1H2023A**	430	6.2%	+5.7%

* Adjusted perimeter to exclude the contribution of Global Enterprise Solutions

** Including ca. € 3 mln of negative forex

© 2022 Leonardo - Società per azioni

From EBITA to Net Result

Solid bottom line

• Net Result impacted by higher financial expenses due to increasing rates and the performance of non strategic equity accounted JVs (in 1H22 financial expenses benefitted from fair value gains on FX hedges), higher income taxes also reflecting tax paid on dividend distribution within the Group and from JVs, and the gain for the disposal of ATM business in US
• Stepping up cash flow : 1H 2023 FOCF at € 517 mln, up 46.9% vs 1H 2022 (€ 973 mln*)
• Continued deleveraging with Net Debt down €1.2 bn vs 1H2022

* Adjusted perimeter to exclude the contribution of Global Enterprise Solutions, sold in July 2022

2023 Guidance Confirmed

	2022A	2023E1
ORDERS (€bn)	17.3	ca.17
REVENUES (€bn)	14.7	15-15.6
EBITA (€mln)	1,218	1,260-1,310
FOCF (€mln)	539	ca. 600
NET DEBT (€bn)	3.0	ca. 2.62

• Continued solid commercial momentum, with book-to-bill>1x
• Successfully navigating inflationary pressures
• Continued improvement in FOCF and focus on deleveraging

2023 exchange rate assumptions: € / USD = 1.10 and € / GBP = 0.87

1) Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and

assuming no additional major deterioration

2) Assuming dividend payment od € 0.14 p.s. and new leases for ca 100 mln

Agenda

-

• Q&A
• Sector results
• Appendix

• Key messages Roberto Cingolani, Chief Executive Officer

• Financial review Alessandra Genco, Chief Financial Officer

Q&A

Agenda

-

• Q&A
• Sector results
• Appendix

• Key messages Roberto Cingolani, Chief Executive Officer

• Financial review Alessandra Genco, Chief Financial Officer

Helicopters Strong order growth

• Strong level of order intake expected both in civil and governmental; confirming increasing revenues and deliveries
• Good level of profitability supported by structured actions to offset inflationary pressure

(*) Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and assuming no additional major deterioration

Electronics

Growing revenues and profitability

1) Adjusted perimeter to exclude the contribution of Global Enterprise Solutions

* Avg. exchange rate €/\$ @ 1.09 in 1H22; Avg. exchange rate €/\$ @ 1.08 in 1H23

** Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and assuming no additional major deterioration

© 2022 Leonardo - Società per azioni

Aircraft Solid profitability

1,700

2018-2022 Results

			2Q/1H23 Results
	€ mln	2Q 2022	2Q 2023	% Change
Orders		709	766	+8.0%
Revenues		690	789	+14.3%
EBITA		98	106	+8.1%
RoS		14.2%	13.4%	-0.8 p.p.
	€ mln	1H 2022	1H 2023	% Change
Orders		1,490	1,497	+0.5%
Revenues		1,261	1,348	+6.9%
EBITA		150	160	+6.7%
RoS		11.9%	11.9%	0 p.p.

2Q/1H23 Results

1H23 Revenues by platform

2023 Outlook(*)

• Growing export market for proprietary platforms
• Confirming strong contribution from Fighter business lines (F-35 and Eurofighter)

* Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and assuming no additional major deterioration

Aerostructures and ATR

Recovery on track

* Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and assuming no additional major deterioration

© 2022 Leonardo - Società per azioni

Space Solid performance of Satellite services

* Based on the current assessment of the effects deriving from the geopolitical situation on the supply chain and the global economy and assuming no additional major deterioration

Agenda

-

• Q&A
• Sector results
• Appendix

• Key messages Roberto Cingolani, Chief Executive Officer

• Financial review Alessandra Genco, Chief Financial Officer

2Q/1H 2022 Results

Group Performance

€ mln	2Q 2022	2Q 2023	% Change	1H2022	1H2023	% Change	FY 2022
New Orders	3,521	3,823	+8.6%	7,310	8,691	+18.9%
Backlog				36,358	39,119	+7.6%
Revenues	3,570	3,860	+8.1%	6,576	6,894	+4.8%	14,713
EBITA	286	325	+13.6%	418	430	+2.9%
RoS	8.0%	8.4%	+0.4 p.p.	6.4%	6.2%	-0.2 p.p.
EBIT	239	275	+15.1%	362	368	+1.7%
EBIT Margin	6.7%	7.1%	+0.4 p.p.	5.5%	5.3%	-0.2 p.p.
Net result before extraordinary transactions	193	157	-18.7%	267	197	-26.2%
Net result	193	168	-12.9%	267	208	-22.1%
EPS (€ cents)	0.333	0.278	-16.5%	0.462	0.341	-26.2%
FOCF	118	171	+44.9%	-962	-517	+46.3%
Group Net Debt				4,793	3,637	-24.1%
Headcount				50,441	52,306	3.7%	51,392

Free Operating Cash-Flow (FOCF): is the sum of the cash flows generated by (used in) operating activities (which includes interests and income taxes paid) and the cash flows generated by (used in) ordinary investment activity (property, plant and equipment and intangible assets) and dividends received

Solid Group liquidity ensures adequate financial flexibility

• Available credit lines
  • ESG Credit Line signed in October 2021 equal to € 2.4bn
  • Existing unconfirmed credit lines equal to € 1.0bn
  • Commercial Paper, signed in August 2022, equal to € 1.0bn
  • New «Sustainability-Linked» EIB loan equal to € 0.3bn

together with the Revolving Credit Facility signed in November 2022 by Leonardo DRS, following the merger with RADA, available for € 0.1bn and cash in-hands ensure a Group's liquidity of approx. € 5.9bn

Balanced debt maturity profile

	As of today	Before last review	Date of review
Moody's	Baa3 / Stable Outlook	Ba1 / Positive Outlook	May 2023
S&P	BB+ / Positive Outlook	BB+ / Stable Outlook	May 2022
Fitch	BBB- / Stable Outlook	BBB- / Negative Outlook	January 2022

Covenants FY2022

	FY2022A Post IFRS 16		FY2022A Post IFRS 16
EBITDA*	€ 1,671 mln	Group Net Debt	€ 3,016 mln
Net Interest	€ 104 mln	Leasing (IFRS 16)	- € 570 mln
		Financial Debt to MBDA	- € 713 mln
		Group Net Debt for Covenant	€ 1,733 mln
		EBITDA*	€ 1,671 mln
EBITDA / Net Interest	16.1	Group Net Debt / EBITDA	1.0
THRESHOLD	> 3.25	THRESHOLD	< 3.75

* EBITDA net of depreciation of rights of use

© 2022 Leonardo - Società per azioni

Remuneration Policy aligned with shareholders interests, business strategy and ESG criteria

• Convergence of interests between management and shareholders
• Aligning the remuneration package with international market best practices
• Including Sustainability/ESG objectives, consistently with business strategy
• Complying with transparency and merit system principles of the Group strategy
• Attracting / retaining key performer resources
• Reducing excessively risk-oriented behavior

CEO REMUNERATION COMPONENTS

VOTING IN FAVOR OF REMUNERATION REPORT

CEO short term variable remuneration (MBO)

Long Term Incentive Plan (LTIP)

Beneficiaries: Chief Executive Officer and key managers (executive in the Company, Subsidiaries, associates (former employees) in top management and/or other management positions in the Company or Subsidiaries) up to a maximum of 250 resources.

Connecting ESG progress and remuneration

Confirming alignment between Industrial plan and management performance

10%

of short-term variable remuneration linked to ESG objectives

20%

of long-term variable remuneration linked to ESG objectives

CEO & General Manager

• 5% Inclusion of Leonardo in DJSI
• 5%Average accident frequency rate*

• Managers

•1,050+ managers, including Managers with Strategic Responsibilities and Senior Managers.

•CEO & General Manager

• 10% Scope 1 & 2 GHG Emissions**
• 10% Gender diversity, percentage of female new hires w/ STEM***

• Managers

• 215+ managers of the Group, including Managers with Strategic Responsibilities and Senior Managers

* Calculated according to the GRI method as number of accidents per 1,000,000 hours worked. The target is 3.3 at 2023

** Calculated according to the location-based method as a ratio of emissions of Scopes 1 and 2 location-based (tCO2e) to revenues (€mil.) per year (Intensity of CO2 emissions on revenues). The target is 32 at 2025.

*** Calculated as the ratio of female new hires with a STEM degrees out of total new hires with a STEM degrees – The average target is 26% over the three-year period 2023-2025

SAFE HARBOR STATEMENT

NOTE: Some of the statements included in this document are not historical facts but rather statements of future expectations, also related to future economic and financial performance, to be considered forward-looking statements. These forward-looking statements are based on Company's views and assumptions as of the date of the statements and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Given these uncertainties, you should not rely on forward-looking statements.

The following factors could affect our forward-looking statements: the ability to obtain or the timing of obtaining future government awards; the availability of government funding and customer requirements both domestically and internationally; changes in government or customer priorities due to programme reviews or revisions to strategic objectives (including changes in priorities to respond to terrorist threats or to improve homeland security); difficulties in developing and producing operationally advanced technology systems; the competitive environment; economic business and political conditions domestically and internationally; programme performance and the timing of contract payments; the timing and customer acceptance of product deliveries and launches; our ability to achieve or realise savings for our customers or ourselves through our global cost-cutting programme and other financial management programmes; and the outcome of contingencies (including completion of any acquisitions and divestitures, litigation and environmental remediation efforts).

These are only some of the numerous factors that may affect the forward-looking statements contained in this document.

The Company undertakes no obligation to revise or update forward-looking statements as a result of new information since these statements may no longer be accurate or timely.

												EMARKET SDIR
											CERTIFIED	1
												●
												●
												0

CONTACTS

Head of Investor Relations and Credit Rating Agencies

+39 06 32473.697

valeria.ricciotti@leonardo.com

Leonardo Investor Relations and Credit Rating Agencies

+39 06 32473.512

ir@leonardo.com

34

© 2022 Leonardo - Società per azioni