Exosens Stock

Welcome to Exosens' 2026 Half Year Results Presentation. [Operator Instructions]

Now I will hand the conference over to Laurent Sfaxi, Head of Investor Relations, to begin today's call.

Good morning, everyone, and thank you for joining us for Exosens' First Half 2026 Results Presentation. I'm Laurent Sfaxi, IR at Exosens. I'm joined today by Jerome Cerisier, our CEO; and Quynh-Boi Demey, our CFO. They will review our first half business performance and strong financial results and also present our outlook for the year. This presentation will be followed by a Q&A session, so you will be able to ask your questions.

I will now hand over to Jerome.

Thank you, Laurent. Good morning, everyone, and thank you for joining us. So Exosens delivered another strong performance in the first half of 2026 as we combine sustained double-digit growth, further margin expansion, robust cash generation and a strong balance sheet.

Let me start perhaps with 4 key messages. First, the revenues reached EUR 253.1 million, an increase of 15.3% year-on-year and 11.4% on a like-for-like basis. Growth was broad-based across both segments. Amplification revenue increased by 11.6%, including a 10% like-for-like growth, while Detection & Imaging grew 24.3% with a perfectly strong like-for-like growth of 14.6%.

Second, profitability reached a new record level. Adjusted EBITDA increased by 18.3% to EUR 83.60 million, and the EBITDA margin expanded to 33%. This performance reflects the strength of our technology positions but also a favorable product mix, higher volumes and consistent operational execution across our industrial footprint.

Third, we continue to invest for future growth while preserving a strong cash generation and some financial flexibility. So the free cash flow amounted to EUR 31.4 million despite a significant acceleration in our growth CapEx, and our leverage ratio is now 1.2x adjusted EBITDA to be compared with 1.3x at the end of 2025.

Fourth and finally, based on the strong first half performance and our current visibility, we now expect the guidance to be towards the upper end of our 2026 revenue and adjusted EBITDA guidance ranges. I will come back to that at the end of the presentation.

So let's review the main developments across our businesses. On the amplification market, amplification continued to deliver a strong execution, supported by commercial momentum, technology leadership and continued expansion of our industrial platform.

On the commercial side, a major milestone was actually achieved during this first half of the year with the award of contracting to the U.S. Army, the BiNOD program. This is a program of record and it's key to validate our in-country industrial strategy that will also strengthen our long-term position in the United States. And as you know, the U.S. market represents about 45% of the global night vision market. We also continue to win business across the broad range of European markets and NATO countries as the sole sizable ITAR-free supplier.

On innovation, we are progressing with our augmented reality MicroDisplay, which brings digital information directly into the image intensifier tube. This technology is fully formed and fit, compatible with existing goals. So it allows real-time tactical information display while preserving the night performance, the core image quality, the identification performance that every single user continues to expect.

In parallel, we completed the integration of NVLS. As you know, NVLS expands our addressable market in the high-end man-portable night vision through particularly its wide-field-of-view expertise. In the United States, we are preparing also the co-location of Photonis Defense headquarters in Sturbridge, Massachusetts alongside our already existing detection business and so alongside our image intensifier tube production facility being incepted. So this co-location, this U.S. hub creates a more integrated U.S. organization, enables a closer engagement with customers and generate efficiencies through shared services for support functions.

We continue to invest into our production capacity as we continue to witness the strength of the customer demand. Since 2020, we have successively and progressively implemented successive investment stages. Back in 2025, we announced 2 capacity or 2 stages of expansion for a total of EUR 37 million investment. And this program is now ongoing, both for the Europe and the United States. I remind you, it's expected to increase image intensifier production capacity by about 40% by the end of 2027 if we compare it to 2024.

The first benefits of the European investments are expected in the second half of 2026. while the first deliveries of the U.S. facility are expected in H1 2027. At the same time, given the acceleration in global demand and the market opportunities we see, we are actively evaluating further staggered capacity additions beyond the current program to respond to this increasing demand. So our approach in capacity increase remains disciplined. We invest in line with visibility on demand, while we -- it's important that we preserve our industrial mastership, our product quality, our efficiency and above all, our high yields as they command our ability to serve our customers and they command also our margins.

More specifically on the U.S. facility, if I turn now to the rollout of our new Sturbridge production facility, it is progressing as planned. It's, as you can see, located to our existing U.S. Scientific and Photonis Defense operations. The key production equipments have been ordered. The project teams are on board. The first personnel have been trained or are being trained within our Europe facilities. I'll remind you that the initial facility is expected to represent 10% to 15% of the total image intensifier capacity by end 2027.

This facility provides us with an ITAR-controlled production capability to serve the U.S. Department of Defense and law enforcement markets. It's a very important step. Actually, it's a strategic step in accessing the U.S. market as the U.S. market requires a local production for its forces. So we are committed to sell this market in the short, in the medium and the long term with this establishment.

Concerning Detection & Imaging, we delivered a significant acceleration in growth during the first half, supported by the strong demands in defense and surveillance, continued commercial development in our other verticals and disciplined M&A execution.

In defense and surveillance, we are expecting our customer base -- sorry, we are expanding our customer base among leading unmanned system OEMs, autonomous system developers, first tier OEMs in all types of applications, be it surface, be it ground, be it air.

During this half, we secured our largest order to date from a major European developer of autonomous air defense systems, which confirms the increasing role of advanced imaging in drone and counter drone and autonomous defense applications.

In our commercial markets, we achieved several new design-in wins in high-performance mass spectrometry, electron microscopy, semiconductor detector applications, which will, in turn, nurture growth in the coming years. We are also seeing, by the way, in nuclear, a strong commercial momentum, especially in the U.S. concerning small modular reactors.

Our innovation pipeline remains active. And on the M&A side, we completed the integration of Phasics, so a leader in wavefront sensing technology. And we completed the acquisition of Emberion, which adds a differentiated quantum dot SWIR capability to our portfolio. I think we will turn back to -- or come back to Emberion in our M&A section.

Let me perhaps give a little bit more light on the defense and surveillance applications in detection imaging. This is definitely, for the time being, one of the most attractive areas of growth for Exosens. We cover the whole spectrum from ultraviolet to visible light to near, short, mid and long wave infrared, which enables us to address a wide range of mission-critical applications.

We have identified 3 particularly attractive application areas: platforms, with an expected midterm growth of around 8%; surveillance, with an expected growth of around 10%, driven by counter-drone applications; and last but not least, the drone themselves, where drone imaging represents a midterm growth rate of about 17% [indiscernible].

So these markets, they require increasingly capable multispectral solutions for detection, identification, tracking, targeting and situational awareness. Exosens as a group is very well positioned because we combine a broad technology field-proven portfolio of technologies. We cover multiple usages with the ability to industrialize, to scale up to deliver in quality, in quantity, reliable and high-performance products. It's this combination that puts us in a good position on this market.

We wanted to also illustrate better our position. Our position really in the value chain is at the core of it. We operate in the critical sensing and imaging layers. We create data. We create information. We supply sensors and detectors that convert light or radiation, photonic radiations into an electrical signal or into images. And so we provide mission-critical data that are needed by our OEMs to integrate to make decisions and to act at the system level.

So our customers, they integrate these technologies into payloads, into gimbals, into turrets, into sights, into complete mission systems finally for the benefit of our end users. This is what allows us to partner with a broad range of OEMs with a common platform, common sensors, common devices, we can serve all OEMs in their different applications. And that allows, nevertheless, us to remain focused on the areas where our technology and industrial know-how create the greatest value and with the right to the effort needed to master these technologies.

Defense and surveillance is the fastest-growing defense segment for the time being. We see strong momentum across platforms, across surveillance and drone-related applications. And if I want to dig a little bit more into the detail there, on platforms, the European defense modernization and the fab equipment bases are driving the procurement of advanced electro-optical or optronic systems in all types of mediums. We continue to strengthen our relationships with leading defense brands, with OEMs in absolutely all domains.

Drones and counter drones applications remain the fastest-growing market. The demand for advanced imaging, combat-qualified and proven solutions continues to increase, and we are strengthening our position with leading OEMs, but also with autonomous system providers, which are part of the new defense ecosystem.

In surveillance, investment is increasing in border protection, but more importantly, in critical infrastructure and counter-drone capabilities. So this segment or this market requires particularly cooled infrared solutions for long-range detection, tracking of drones, again, across all mediums whether that is air, land and sea. So we are seeing our technology being increasingly selected by OEMs for these demanding applications.

That has resulted for Exosens the need to expand our capacity. So this accelerating demand actually requires larger volumes of production at shorter time frames. And so for compact thermal imaging solution used in drone payloads and air defense systems, we are tripling our capacity by the end of 2026. And for cooled infrared cameras, we are doubling this capacity over the same period.

These investments have started, already underway. They are partially implemented. They will continue for the year, and they are designed to support the strong growth while maintaining the product performance and the industrial mastership of the quality and the delivery ability that is expected by all our customers.

Here again, we will continue to expand as the market demands and as the market commands. We see capacity expansions as a way to follow the requirements of our customers, and we are doing so in a disciplined yet rigorous way.

On commercial market, the picture remains differentiated by vertical, but the long-term structural drivers are intact. In life sciences, if I start with that one, the market conditions remain soft in the U.S. scientific research and the microscopy. However, the mass spectroscopy inventory correction has ended, which is allowing for a renewed increase in demand and a confirmed long trend towards higher performance and electrical systems, which is perfectly well supported by our technical leadership, especially in the time-of-flight programs.

So that resulted in several design wins, not only in mass spectrometry, but also in electronic microscopy. And the key in these instruments -- the design for instruments will result in future growth when these instruments are launched, starting 2027 and more notably in 2028.

In industrial control, the market conditions are gradually improving. The deployment of artificial intelligence infrastructure is supporting renewed investments in all areas, especially in semiconductors, in industrial automation or in advanced manufacturing. And that creates for us a structural demand, driving growth for machine vision applications and real-time process monitoring, which we are providing cameras to.

Finally, in nuclear, we continue to see a strong momentum in the U.S. small modular reactors. The Department of Energy's Reactor Pilot Program that was launched last year is creating series and prototype demand, which is now starting to be followed by near-term pre-series orders, all of that resulting in a strong growth for our activities. So the commercial opportunities we see are increasing.

Obviously, this is driven by the new, quick, close to usage points, alternative sources of electric power that are required or heat energy even. So over the long term, the growing electricity demand for AI centers, coupled with local production, gives -- seems to be a good outcome, let's say, for SMR market. And so as it face basically the grid connection costs and that seems to be fueling significantly the demand for SMR market. So we see this market as being growing at a fast pace for the coming years.

So I will now hand over to Quynh-Boi and she can finish the overview of the market. And Quynh-Boi will take you through the M&A strategy and our financial performance.

Thank you, Jerome. As we said at the time of the IPO, our strategy combines strong organic growth with targeted bolt-on acquisitions. Our ambition is clear and it's to become the leading consolidation platform in electro-optics, while we remain highly disciplined in how we deploy capital.

So first, we target companies with technology assets that complement our own portfolio. So when developing a technology internally will take too long or involve significant execution risk, acquisitions allow us to accelerate innovation while reducing time to market.

Second, we focus on companies that operate within our 4 core end markets of defense and surveillance, life sciences, industrial control and nuclear that expand our addressable market and strengthen our competitive positioning.

Third, we prioritize businesses that have already reached industrial scale with proven customer relationships and leadership positions in their respective niches. That said, we also remain open to early-stage companies when they offer strategically important technologies with strong long-term potential, which is typically the case of our latest acquisition Emberion that I will show you later.

So what do we bring to these businesses? We provide global commercial platforms that accelerate market penetration; industrial excellence across manufacturing and supply chain; and a strong technology ecosystem supported by deep R&D capabilities and a robust IP portfolio.

This creates value on multiple fronts: faster growth, broader market exposure and a more diversified and resilient business model. Importantly, our acquisitions are not only growth accretive; they also create value through operational synergies, margin expansion and stronger cash generation.

Emberion is a good example of our [indiscernible] acquisition strategy. It is an innovative company specializing in short wave infrared imaging with operations in Finland and in the U.K. This acquisition strengthens our position in SWIR technologies, and it also open up new opportunities in defense applications, especially for drones and portable imaging systems, while it also allows us to broaden our offering in industrial control and semiconductor inspection.

Most importantly, Emberion is exactly the type of company we are looking for. It offers differentiated technology that can grow faster by leveraging Exosens' global commercial platform, industrial capabilities and technology expertise.

Now let's have a look on how -- what Jerome explained earlier on the market trends have translated into our financial performance for the first half of 2026.

So we continue to deliver strong growth while also improving our margin. Revenue is up 15%, adding EUR 33 million overall. So EUR 18 million from Amplification, driven by solid defense investment, but also excellent execution with our factories that now run at full capacity. EUR 15 million of the growth is coming from Detection & Imaging. It's mainly driven by the drone and counter-drone markets and also the addition of the newly acquired companies, Noxant and Phasics.

And our adjusted gross margin also grew by 17% to EUR 129.9 million. As a percentage of sales, adjusted gross margin improved from 50.8% to 51.3%, and that's up 0.5 point compared to last year. This adds about EUR 18 million in gross margin with EUR 11 million from Amplification and EUR 7 million from D&I.

Now let's dive into the details on the next slide by segment. Let's start first with Amplification. Revenue grew by 11.6% or 10% on a like-for-like basis as NVL Spain had a limited contribution during the first half. This strong organic performance was driven by 3 factors: sustained market demand, good operational execution and a favorable product mix.

On the demand side, growth continues to be fueled by increasing deliveries of night vision goggles for land forces, which rely on our image intensifier tubes. The changing nature of modern warfare and particularly in Ukraine continues to reinforce the importance of night vision capabilities and is driving sustained demand from armed forces and especially in Europe with the threat of Russia.

Operationally, we are currently running our European production site at full capacity. Despite ongoing expansion works, we maintained very high production yields through continuous process improvements, optimized production scheduling and good manufacturing execution. That finally results in limited scrap and rework.

And finally, we continue to benefit from a favorable product mix with growing demand for our highest performance image intensifier tubes. As a result, Amplification gross margin increased by 110 basis points year-on-year to 52.5%, which is a record level for the business.

Turning now to Detection & Imaging. Revenue increased by 24.3%. That includes a 14.6% like-for-like growth that reflects both the contribution from the acquisitions that we completed in 2025 and the strong organic momentum. Organic growth was primarily driven by continued strength in defense and surveillance and particularly imaging solutions for drone, counter drone and long-range surveillance applications, together with the sustained momentum in nuclear instrumentation as commented earlier by Jerome.

These positive trends were partly offset by the continued softness in U.S. scientific research and life sciences, where our customers remain cautious with their investment spending.

On profitability, our gross margin reached 48.1%. They are broadly stable compared to the full year of 2025, but it's 60 basis points lower than in the first half of last year, and it's mainly the result of an unfavorable product mix due to the lower contribution from our higher-margin scientific research and life sciences activities.

Moving to profitability. Adjusted EBITDA increased by 18% to EUR 83.6 million. The adjusted EBITDA margin reached 33%, an improvement of 84 basis points year-on-year, and it's a new record for the group. Adjusted EBIT increased by 19% to EUR 71.8 (sic) [ 71.7 ] million with the margin expanding by 93 basis points to 28.4%, which is also a new record for the group.

The principal drivers of this performance were operational excellence, the favorable product mix in Amplification and the benefits of volume and scale. So we continue to grow faster than our fixed cost base while maintaining discipline across the organization and investing selectively in the capabilities required for future growth.

This performance flows down to the net income. Excluding the noncash trademark impairment, net profit from continuing operations increased by 21% year-on-year to EUR 35.9 million.

So there are 2 points I'd like to highlight here. The first, in our 2025 results, we still had EUR 1.7 million loss from the microwave amplifiers business, which we divested at the end of 2025. This business is therefore no longer part of our continuing operations.

Second, during the first half of 2026, we completed the transition to a single Exosens brand across the group. As Exosens has become increasingly recognized since the IPO, moving to a single brand provides customers and partners with a clearer and more consistent identity. As part of this transition, we recognized a noncash trademark impairment of approximately EUR 21 million on a net basis, mainly related to the Photonis brand. This accounting adjustment has no impact on the group's cash flow or underlying operating performance.

So I skip the slide on R&D and CapEx for the sake of time so that we have enough time for the Q&A.

So let's move directly to the free cash generation, Slide 29. So cash flow generation, we delivered a very solid performance in the first half. Free cash flow amounted to EUR 31.4 million. This is broadly in line with the strong level that we achieved in 2025 despite a significant increase in growth investments. So higher EBITDA, as you see, was partly offset by increased working capital requirements, which is a natural consequence of delivering more than 15% revenue growth.

That said, disciplined working capital management, especially on receivables helped contain the increase. At the same time, growth CapEx almost doubled as we continue to invest in expanding our production capacity.

Our capacity expansion program is progressing on schedule. So construction is underway in France, the Netherlands and the U.S. to accommodate additional production equipment. In Europe, new machines have already been commissioned and qualified with the first additional capacity expected to come on stream in the second half of 2026. And in U.S., the new facilities remains on track to come on stream in mid-2027.

Finally, our CapEx to sales -- well, at the same time, as we increase our CapEx for growth, our CapEx to sales ratio remained fully in line with our guidance of 9.2%.

Let me conclude with our balance sheet. So at the time of the IPO, we significantly strengthened our financial profile with the refinancing of our debt as we secured a EUR 250 million term loan B and the EUR 100 million of revolving credit facility, both maturing in 2029. In June, we further enhanced our financial flexibility by doubling the size of our RCF to EUR 200 million. And we also secured a new facility with the European Investment Bank for a total amount of EUR 140 million. So both facilities remain fully undrawn today.

Our balance sheet remains very strong. Leverage decreased from 1.3x at the end of 2025 to 1.2x at the end of June, where we maintained a solid cash position. With strong cash generation, a conservative leverage profile and more than EUR 340 million of undrawn committed financing, we are well positioned to fund both our organic growth ambitions and our bolt-on disciplined acquisition strategy.

With that, I'll hand over to Jerome, who will conclude today's presentation with our outlook for 2026 and the midterm.

Thank you, Quynh-Boi. So based on the strong first half performance and the continued momentum we are seeing across our businesses and our end markets, we are now expecting both revenue and adjusted EBITDA to be towards the upper end of our guidance ranges for 2026. As a reminder, they were given as for revenue between EUR 520 million and EUR 540 million and for adjusted EBITDA between EUR 168 million and EUR 178 million.

As our capacity expansion programs continues to progress as planned in both Europe and the U.S., we also reaffirm our guidance for industrial CapEx of around 9% of sales and R&D capitalization of about 3% of sales. Beyond 2026, our investment case remains unchanged and strong. We continue to target an average annual organic revenue growth of up to the mid-teens, while growing the adjusted EBITDA at more than 15% per year on average, supported by further margin expansion. At the end of our current investment cycle, we expect industrial CapEx to normalize to around 5% of sales while maintaining R&D capitalization at about 3% of our sales.

So as a conclusion, we are very pleased with the performance delivered in the first half. We achieved another period of double-digit growth, further margin expansion and a strong cash generation, while, of course, continuing to invest for the future. So we also see the structural drivers supporting our business, be it in defense and surveillance, in life sciences, in industrial control, in nuclear, remain firmly in place. And our balance sheet gives us the flexibility to continue investing in both organic growth in the form of hard CapEx, R&D and working capital and in targeted acquisitions.

Overall, we remain very confident in our outlook for the second half of 2026 and in our further ability to continue to creating value over the coming years until the midterm.

That concludes, I think, our presentation of the results. And with that, operator, I think we are ready to take any questions.

[Operator Instructions] The next question comes from Aleksander Peterc from Bernstein.

I just have 2. The first one is on your potential further capacity increases. Could you help us understand if you see today that demand is very strong into the end of the decade, why wouldn't you decide on this further capacity increase today? Or do you have more time, you need to complete first the current cycle of this 40% increase and only then start putting in place the next stage? That will be my first question.

And the second one is on M&A. Can you give us an idea of the pipeline of opportunities you have right now? How many companies you're looking at? And what kind of size of the targets? Are they effectively larger now that you have more firepower?

Okay. Thank you, Aleksander. So on further capacity increase, as we stated, we constantly reevaluate demand. We are in an active phase in really understanding what the demand is looking like and the demand remains -- continues to strengthen. So we will consider further capacity increase as soon as practically demand solidifies.

And we don't necessarily need to wait until the current capacity increases are implemented before making this decision. We didn't do that, by the way, in the past. But as you know, capacity increase take 18 to 24 months to be implemented. So as a matter of fact, we are not going to wait the midterm before we decide to increase capacity further if the market and if the demand continues to strengthen earlier than that.

On the M&A, we don't change our strategy, which has always been to continuously screen the market and look for high-value technology assets. Most of the time, they are [ of GOUs ]. So we don't really mind whether it's for defense or nondefense. They have to be positioned into core verticals where we operate.

So in terms of pipeline, we constantly have 7 to 8 companies that we screen, which is the case today. Our pipeline is quite rich. But as you know, with M&A, it always takes time. And in terms of the size of our acquisitions, so we don't -- so far, we've always looked for companies which typically have sales above EUR 10 million.

But as you saw with Emberion, we also look for assets which have long-term potential growth and differentiated technology, which is typically the case of Emberion with the quantum dots that would strengthen our SWIR portfolio. And now what we can afford as well is to look for acquisitions which can be a little bit larger, so EUR 50 million to EUR 100 million of sales typically, and as you know, with M&A, it takes time. So let's see.

The next question comes from Aurelien Sivignon from ODDO BHF.

I have 3. The first one on D&I. Could you give us a bit more color on the defense and civil growth in H1 since I guess it's pretty much above the 15% like-for-like growth reported at division level? And was it mainly driven by existing program ramping up? Or are you already starting to see some contribution from new platform wins?

Then a follow-up maybe on the previous question regarding capacity increase. Can you just be precise if you are looking at capacity additions in Europe, in the U.S. or in a new location? And the last one on NVLS. Can you provide an update on the integration? And since the contribution was, I think, rather small in H1, should we expect deliveries under the Spanish program to start contributing more meaningfully, let's say, to revenue from H1 onwards?

Okay. So concerning Detection & Imaging and the growth of the defense vertical in this market, the drones and counter-drone applications are definitely the fastest-growing applications in the defense and imaging segment so far. So yes, it's higher than the average growth for the segment as the demand is there.

And the typology of our customers is actually already quite spread, quite large with both Tier 1s, but also newcomers, newcomers in the sense that there are recent companies that are participating to the drone and counter-drone rally and that are belonging and starting to form the new defense ecosystem. So we have both of that. And as a matter of fact, the largest orders we are seeing and the most promising, let's say, orders we are seeing are coming from new OEM platforms.

As far as capacity increase is concerned concerning D&I, we are really focusing on strengthening our supply chain, reducing our delivery times, securing our supply chain. And the capacity increase that we have is in Europe as our production for Detection & Imaging is entirely in Europe. So this is -- and that didn't prevent us from being successful in exporting to other countries that are outside of the continent, including North America. However, today, it is in Europe.

Should the market expand further and should the need arise, we could consider one day to produce in different continents. But as of today, we are talking and doing expansion in our current facilities in Europe.

With regards to your question on NVLS, indeed, the first half had a limited contribution of NVLS, which we expect much higher in the second half.

[Operator Instructions] The next question comes from Marie-Thérèse Grübner from Cantor Fitzgerald, Europe.

I have 2, if I may. The first one pertains to assuming D&I is now growing faster, both organically and inorganically, considering the M&A pipeline and considering the strength of the defense and surveillance subsegment, in particular, I was wondering if you are considering moving to an adjusted EBITDA breakdown by divisions, not just the gross margin, but also the adjusted EBITDA sometime in the near future? That would be my first question.

And your second question, if we may take them both together?

Yes, of course. The second question, I mean, I noticed that there's one domain that is currently not addressed or seemingly not addressed by Exosens, which is the space domain. And I can imagine that there are various applications that are possible for your competencies in the space domain. And I was wondering if this is something that you are looking to address in the future as well.

On the first question about the D&I adjusted EBITDA by division. So what we said at the time of the IPO, and this has not changed, is that in our guide, the common resources are quite shared between the 2 divisions. So splitting between the 2 doesn't make really sense because it will be pure allocation. And this is the reason why at the time of the IPO, we decided to split only at the gross margin level.

And actually, concerning space, this is definitely a domain that is not far from the verticals we are currently addressing. And as a matter of fact, our overall strategy is to self-invest in products that we sort of -- that we -- and developing -- to develop, let's say, the best products for the different applications we target. And doing so, we are ready and actually we are doing -- we are proposing these products to our customers with little customization.

So when it comes to space, you have 2 sides to space. The traditional, let's say, space programs more refer to one-offs and to program type of industry, which is not what we are going to do in principle since, again, we are putting and developing our products for a wide range of applications. However, in the new space, the usage of off-the-shelf products is more well spread.

But so far, we haven't, let's say, identified the right fit between the technology and the exact applications these companies or these constellations, let's say, we are looking for. So we continue to be present on the space market in the form of scientific missions, which are scarce and rare, but where we provide critical technology more on, let's say, technology that is already available to these space missions when it is about discovering the limits or, let's say, the envelopes or the physics in the universe. This is our space participation today. Should we find an application or applications of our products that are in our portfolios, we would have absolutely no problem in working in space, of course.

The next question comes from Sriram Krishnan from Deutsche Bank.

So I had just one question and probably 2 parts to that one. So with regards to the capacity expansion coming from the D&I division, could you give us some idea about what's the kind of CapEx spend which is happening, specifically on D&I on the back of the doubling of production capacity announced this morning? That's part one.

And in a related note, so you did reiterate that the counter drone and the drone market is set to grow at 17% CAGR during the midterm. So do you think your capacity plans currently, whatever you have announced, is sufficient to capture that kind of demand? Or do you think that's also a moving target, so to speak, where you will continue to assess in the coming quarters, so to speak?

So concerning our capacity expansions in Detection & Imaging, what is important to note is that the type of expansion is not of the same nature than in our Amplification market. It's mainly about assembly expansion, which is much less CapEx-intensive, but which requires much more coordination management, program management to coordinate the whole supply chain with all of our suppliers. So it's more of a different nature. And so the CapEx intensity is embarked into -- or can be embarked in our normative CapEx that we target on the midterm.

Further capacity expansions as a result and because it has been our policy and it will remain our policy, they are decided based on demand. Today, we consider that the double and the tripling of our capacity of the drones and in the anti-drones and drones markets are serving the demand for, let's say, the 12, 18 months to come. Should we see further expansion in demand, we would have no issue in deciding and investing more in the capacity expansion. But again, this is less a question of CapEx than a question of supply chain in that case in Detection & Imaging.

[Operator Instructions] The next question comes from David Perry from JPMorgan.

I apologize, I was on the Safran call. So I missed a lot of your call. Sorry for that. And apologies if you've already answered this. I was just curious what percent of D&I sales in H1 came from the defense end market, please?

I'm sorry, David, we couldn't hear very well your question. Can you repeat, please?

How much of [ defense ] accounts for the D&I? Is that your question, David?

Yes, yes, please.

So we usually don't report on a half year basis because it's not representative of the full year. As you know, the phasing of the life sciences businesses is more towards the end of the year. So if we would calculate, this would be higher than the 1/3 that we reported at the end of 2025, but this is not representative at all of what the full year would look like.

So you still think about 1/3 for the full year?

Yes.

All right. I'll read the transcript and see what I missed.

I hand the conference back to the speakers for any closing comments.

Thank you, everyone, for joining us for this call. We remain at your disposal if you have any further questions. We wish you a very good day and a great summer holiday. Thank you all.

Welcome to Exosens 2025 Full Year Results Presentation. [Operator Instructions]

Now I will hand the conference over to Laurent Sfaxi, Head of Investor Relations, to begin today's call.

Good morning, everyone, and thank you for joining us today. I'm Laurent Sfaxi, Head of Investor Relations at Exosens. And I'm joined today by Jerome Cerisier, CEO; and Quynh-Boi Demey, CFO, who will present Exosens' full year performance and discuss our 2026 and new midterm outlook. This presentation will be followed by a Q&A session, during which we will be happy to take your questions.

I will now hand over to Jerome.

So in the second year following our IPO, we delivered a strong performance, exceeding our guidance across all metrics. First, growth. Our revenues reached EUR 468 million in 2025, up 22.1% compared with the previous year, outperforming our high-teens growth guidance. Second, profitability. Adjusted EBITDA amounted to EUR 151.6 million, representing a 26.6% increase ahead of our expectations of low 20s EBITDA growth. Our EBITDA margin reached a record high at 32.4% Third, cash generation. We generated EUR 57.3 million in free cash flow over the period, achieving 73.6% of cash conversion, fully in line with our 70% to 75% guidance range. So this strong performance enabled us to maintain a low leverage ratio of 1.3x adjusted EBITDA. So in 2025, we continue to sustain growth in the Defense and Surveillance market. We continue to invest in capacity expansion to preserve our leadership positions and also to invest into R&D to remain at the edge of the technology.

Altogether, this position puts us strongly to sustain our growth in 2026 and over the midterm, and we'll be happy to go into more details now. We have in the midterm beyond the ambition to reach EUR 1 billion revenue. Our end markets are still Defense, which represents now 75% of our sales, Life Sciences, 10%; Industrial Control, 11%; and Nuclear 4%. Defense and Surveillance is our largest market is driven by the return of high-density conflicts, the growing need for advanced tactical capabilities, be it in night vision, but also in advanced optronics in new technologies requiring mass effects. We benefit from short acquisition cycles, allowing us to have a fast ramp-up and rapid deployment with significant operational impact on the field.

Industrial Control, second, is this market, our sensors create the data required to power artificial intelligence-driven industrial production. So we contribute to enhanced product quality control to faster automation and to robotics. Life Sciences is supported by increasing demand for advanced detection and imaging solutions for drug research, drug discovery. Nuclear is driven by global decarbonization trend and renewed focus on nuclear energy. The market is also supported since -- as we speak, by rising needs driven by fast artificial intelligence development requiring more energy. Overall, we are positioned in niche markets characterized by high technological barriers to entry.

Exosense is fully into the defense cycle. This defense cycle is fueled over the long term by geopolitical backdrop and rising tensions. We are seeing a proliferation of geopolitical tensions across multiple regions from Eastern Europe, of course, in the Middle East to Asia Pacific, alongside with terrorism risks and broader security threats that have not disappeared. This environment is directly translating into higher spending in defense globally with a long-term view and long-term visibility for defense-related demand and Exosense is part of this movement. This changing environment drives a profound transformation of global defense. First, the nature of warfare is changing, evolving towards high density, but also high attrition translates. So there is more consumables and things that needs to be in mass consumed on the field. There is an increase in drone and counterdrone and sensor-based, let's say, activities on the field with a greater emphasis on human machine teaming and digitally augmented soldiers, augmented warfare, augmented assets.

At the same time and as a consequence, the defense industry itself is reshaping, requiring high volume, scalability and technology at the same time simultaneously. Development cycles are accelerating, but Exosens is uniquely positioned by combining technology, scale and adaptability in an evolving environment. In this defense paradigm, Defense and Surveillance represent about 75% of the group's total revenue, be it in night vision, in portable optronics, in surveillance, in platform imaging or in drones and counter drones. And we still have a lot of acumen on -- in Europe with 64% of our revenues and especially in Germany, which represents 25% of our total revenue in 2025.

So perhaps let me now dig a little bit more into our 2 segments. In Amplification, we had several successes this year. First, we secured the largest ever image intensified tube contract with OCCAR, exceeding EUR 500 million of revenues in image intensified tubes, including and represented by a supply of over 200,000 16-millimeter tubes to be integrated into night vision bubbles for the German Armed Forces and for the Belgian Armed forces. More broadly, the demand remains strong across Europe with additional contracts in countries such as France, Spain, also with Northern and Eastern Europe. But the demand remains also strong in other parts of the world in Asia and of course, in the U.S., where in the years to come, the market is expected to expand.

Second, we remain at the forefront of innovation with the launch of the 5G, which we launched last September and which is already seeing some nice commercial successes. This is a breakthrough technology. And the 5G has seen rapid market adoption with 3 early adopters, Theon, Thales, and ACTinBlack and illustrated also by a major order for 7,000 units from ACTinBlack to equip European special forces over the next few years. Finally, we strengthened our portfolio through the acquisition of NVLS, expanding our offering in night vision man, portable devices and integrated solutions. At the same time, also to be mentioned, we completed the divestment of microwave amplifiers in line with our strategy to focus on higher-value activities.

Overall, the Amplification segment demonstrates strong execution, sustained demand and continuous technological leadership. The night vision market, let me go quickly over it. Just mentioning here that Exosense is well positioned to capture market growth in Europe, in the Middle East, in Asia and gaining traction in the U.S. with the announced decision to produce in the country. While night combat is becoming a necessity, equipment levels remain well below the 1 soldier, 1 goggle, the 1:1 level, and that creates massive equipment needs ahead of us. Phasing growth, Exosens follows a strategy to expand capacity, allowing us to invest in additional capacity where it makes sense, step by step and while demand strengthens. So since 2020, we have more than doubled our output through successive expansions. And in 2025, as a reminder, last year, we announced EUR 37 million investment to expand production in both Europe and the U.S., targeting a total 40% increase by 2027 compared to 2024. This plan is designed to further strengthen our global footprint, enabling us to meet growing demand in Europe, in Asia and also in the U.S.

Looking ahead, in response to accelerating global demand, we will continue to actively assess demand, assess the opportunity to increase further our capacity in stagger steps capture any additional revenue growth that we foresee. In the U.S. specifically, our plans are progressing as we wanted them to. The factory implementation is well underway. Key equipment has been ordered. The initial personnel hires has been completed, ensuring, let's say, a smooth operation for the current state. By 2027, we expect that the facility will represent 10% to 15% of the total. And more importantly, it is a facility that is ready to scale further for further capacity expansion as the success on the market or the demand would require. From there and from the U.S., we will be -- we will have an ITAR control production, positioning ourselves and Exosens to serve both the single largest market in the world, but with -- but also internationally the rest of our customers with both ITAR and ITAR-free products. We there are ready and will be ready to serve the DoD customers.

Let me now turn to the key highlights of our Detection & Imaging segment. First, we continue to expand our customer base in Defense and Surveillance, working with leading [indiscernible] OEMs particularly in drone-based applications. We are also seeing a solid momentum in our commercial market with new wins in high-performance mass spectrometry, electron microscopy, semiconductor inspection, driven by our design and approach where we co-develop with the customers the very specific component that they require for their high-end specific applications.

Second, innovation remains at the core of our strategy. We launched several cutting-edge products, particularly for Defense, for Surveillance for homeland security applications. We launched Microcube XP, an ultra-compact thermal core optimized for drones for platforms. We launched Airborne Nano, a compact hyperspectral stabilized camera for drone integration for ground surveillance and observation, both in environmental control, but also in general surveillance.

Finally, we completed in 2025, 2 bolt-on acquisitions,Noxant, enhancing our capabilities in cooled infrared cameras and specifically for Surveillance applications and Phasics expanding our expertise in wavefront sensing technology. So overall, D&I combines accelerating commercial momentum across Defense and Surveillance, continued innovation, disciplined strategic expansion of our portfolio.

To say a little bit more perhaps on the Defense part of the Detection & Imaging segment, which represents about 10% of our total revenue in 2025. This is a doubling, by the way, compared to 2024, where it represented around 5%. Digital imaging is becoming increasingly important in mission critical applications in high-density warfare. The armies require enhanced situational awareness, real-time threat detection, camouflage,decamouflage tracking and all of that is well served by high-end optronics equipment that we provide.

Our portfolio covers 3 main areas. First, the platforms, where we provide visible infrared UV sensors and cameras, including solutions for missile warning systems a market which we see growing at about 8% over the medium term per year. Second, drone and counter drone applications as battlefields become increasingly drone and sensor-based, demand for high-performance visible infrared imaging solutions continues to accelerate. In this market, we see with medium-term growth up to 17% CAGR over the next few years. Third, surveillance, where we deliver advanced visible infrared systems for monitoring, detection and protection missions, where we see this market growing at 10% over the next few years. So overall, Digital Imaging is becoming increasingly strategic and a strategic pillar within our Defense and Surveillance activities, a good combination with Amplification, which is more ground-based and soil-based, land forces based, which positions overall at the core of next-generation multi-domain operations using optronics as the key sensors and multisensor source of information on the battlefield.

Let me now turn to D&I Commercial Markets, starting with Industrial Markets. So that represents about 11% of our 2025 revenue. We have, let's say, the artificial intelligence-enabled vision that is now percolating in the industries, in the factories is creating a new paradigm for Industrial Markets. This drives increasing demand for real-time visual inspection for advanced imaging for predictive monitoring capabilities, so in machine vision and process monitoring, imaging systems are becoming more critical for real-time quality control and predictive maintenance in semiconductor inspection, the increasing chip complexity, the rise of 3D architectures, demands higher high precision, lower wavelength, advanced imaging systems.

And in electrical inspection, the artificial intelligence growth, and electrification are putting pressure on existing power grids, boosting the demand for more energy, but also boosting the demand for having state-of-the-art well-maintained power grids as any other, let's say, critical infrastructure. And this is where we provide critical cameras. Overall, imaging is becoming a structural growth driver across all the industrial markets.

In Life Sciences, which represents about 10% of our revenue, we also have different markets, mass spectrometry. Global inventory adjustments that we saw in 2025 and that drove a temporary slowdown in demand seem to be behind us, and we continue to see now a structural shift towards higher performance systems together with higher level growth. Electron microscopy remains under pressure due to -- partially due to academic funding in the issue that is constrained. But the private sector demand is growing, supported by increased R&D spending, low carbon materials, new discoveries batteries, fuel cell manufacturing, semiconductor testing. So overall, structural demand for higher-performance technology, the most analysis tools, in fact, is there to support long-term growth prospects in our products.

Nuclear, our fourth pillar. It represents about 4% of our revenue. The rising demand for carbon-free energy fueled by the rapid expansion of AI-driven data centers, but more generally by the electrification of many usages is driving unprecedented power need and nuclear energy seems more and more seen as a reliable, scalable, low-carbon solution. We hold positions across all segments, large reactors, small modular reactors, research reactors. And we have a strong market recognition, a unique radiation detection technology. And as an example, in SMR, we are actively engaged with leading players to hold technology leadership in high-temperature efficient chambers, a critical component for certain new generation reactors designs.

So this concludes my remarks on our business performance and the overall, let's say, view of our business in Defense and Surveillance, in Industrial Markets, Industrial Control in Life Sciences and Nuclear. And I will now hand over to Quynh-Boi who will discuss our financial results.

Thank you, Jerome. So as a quick preliminary comments before we dive into the numbers. As of December 31, 2025, we completed the sale of our Microwave Amplification business in the U.S. So under IFRS 5, this activity is now reported as discontinued operations. So you will see its results and cash flow presented on a single line separate from continuing operations for both 2024 and 2025. So you will not find the EUR 394 million that we reported last year. We have EUR 383 million now because we remove the Microwave Amplification that was there.

Looking back at 2025 performance, we delivered both strong growth and margin expansion. First, on growth. We grew 22.1% on a reported basis and 12.7% on a like-for-like basis. So still a very solid underlying momentum. Just a quick reminder of the scope effects to understand the like-for-like bridge. To be comparable with 2024, we need to exclude 5 months of Centronic that we acquired in July of last year of 2024 and 4 months of LR Tech that we acquired in September 2024. And on top of that, we also need to exclude the 2025 acquisitions, Noxant in February, NVLS in July and Phasics in October to present a clean like-for-like view versus last year. So what does this growth tell us?

First, it confirms our ability to ramp up capacity and capture opportunities in a fast-growing defense market, as Jerome just outlined. In Amplification, this translated into roughly EUR 50 million of additional revenue. Second, it demonstrates our disciplined execution for our M&A strategy. We closed 3 acquisitions in 2025, contributing to the EUR 33 million of additional revenue in Detection & Imaging, where we focused our external growth efforts. On profitability, we achieved 24% growth in adjusted gross margin, reaching now a 50% gross margin. This reflects on the one hand, higher volumes and on the other hand, margin expansion, which I will detail in the next slides.

So let me focus now on the performance by division, starting with Amplification. Amplification mainly addresses the defense market, and the growth this year was largely organic as NVLS was only consolidated from mid-July. We delivered 18% growth overall, including an almost 15% organic growth, which is primarily volume driven. What is particularly strong here is that while ramping up volume significantly, we also improved gross margin by 187 basis points, reaching 50.5% gross margin. Most of this improvement comes from better yields. The positive price/mix effect helped offset the dilutive impact from NVLS. So this really demonstrates our operational excellence. We have been able to scale production significantly over the past few years while maintaining quality and improving efficiency.

Now turning to Detection & Imaging. D&I addresses industrial and commercial markets for about 2/3 of the business, while Defense now represents roughly 1/3. We delivered a 28% growth, including the contribution from our acquisitions. On a like-for-like basis, growth was 5%, which marks an improvement compared to H1 where we were at minus 2.5%. As a reminder from our half year call, with the new U.S. administration, we saw a slowdown in U.S. scientific research investments and uncertainty around tariffs also delayed purchasing decisions from some of our customers. We continue to face softness in Life Sciences, scientific research and environmental markets. And on top of that, we still face also uncertainty from tariffs However, this is being offset by growing demand for imaging and protection systems in defense applications. As Jerome outlined earlier, cameras and drones, long-range surveillance systems to detect large-scale drone attacks and missile warning systems installed on aircraft that are not vehicles.

The stronger momentum in Defense explains the acceleration we saw in the second half with H2 growth reaching plus 11.3%. D&I's gross margin came in at 48.3%, which is broadly stable compared to the 48.6% in 2024. The slight dilution mainly reflects the impact of acquisitions. We delivered best-in-class EBITDA margin of 32.4% and EBIT margin of 27.3%, which are record high for us. That reflects our strong positioning in the market with a high level of technology and industrial know-how. While we delivered growth and margin expansion, we also controlled our cost structure, benefiting from scale effect. This resulted in a 115 basis point improvement in EBITDA margin and 172 basis points in EBIT margin.

Let me briefly walk you through our net profit. So bottom line, we delivered a EUR 42.7 million in net profit. This includes a EUR 27.5 million net loss from the sale of our Microwave Amplifier assets. This loss is largely noncash and triggered the activation of around EUR 6 million of deferred tax assets in the U.S. So strategically, this transaction allows us to redeploy capital toward activities with stronger growth, higher margins and better synergies within the group. And if we exclude this impact, net profit from continuing operations reached EUR 70.2 million, more than double last year's EUR 34 million.

There are 3 key drivers behind this improvement. First, we grew our operating profit. But what we also had is last year, we had EUR 40 million of one-off IPO-related consulting fees. Second, following the IPO, we refinanced and restructured our debt, so significantly reducing our financing costs. And third, the higher tax charge simply reflects stronger performance. Our cash tax rate was about 18% as we continue to benefit from tax loss carryforwards in France, which are available until the end of 2026. Overall, this reflects a structurally stronger financial profile and a solid operational momentum.

Let's go now to free cash flow, Slide 36. So we generated EUR 57.3 million in free cash flow, which is consistent with the level we achieved in 2024. While EBITDA increased, the positive impact was partially offset by higher working capital needs, which is expected given our 2025 growth in activity. A large part of this increase is tied to inventory build in response to sustained demand. That said, efficient inventory management allowed us to reduce our inventory as days of sales by 3 days. Importantly, we maintained tight control over CapEx even as we scale operations. As a result, we achieved a cash conversion ratio of 73.6%, which is stable versus last year and fully in line with our guidance of 70% to 75%.

Finally, let's turn to our leverage, as shown on the slide, thanks to strong free cash flow and disciplined CapEx, net debt remains well controlled, keeping leverage at a comfortable 1.3x our EBITDA, preserving financial flexibility. Given our strong financial performance and robust cash generation, the Board of Directors decided at this meeting on 20th of February to propose a cash dividend of EUR 0.3 per share for the 2025 fiscal year. This represents a payout ratio of 20% to 25%, reflecting our commitment to returning value to shareholders while maintaining financial flexibility.

I'd like to briefly touch on sustainability, which is fully embedded in how we manage and grow the group. It's not a parallel agenda. It's integrated into strategy, risk management and operational discipline. Our road map is built around 4 pillars: sustainable partnerships, social responsibility, environmental sustainability and governance with purpose. On climate, we set our 2030 and 2050 decarbonization targets aligned with science-based targets initiative covering Scope 1, 2 and material Scope 3 emissions. We aim for a 42% reduction in Scope 1 and 2 by 2030 and 90% across all scopes by 2050, using operational levers like energy efficiency, heat decarbonization and renewable electricity. So action plan at site level are already integrated into investment and CapEx planning.

On the social and governance side, we strengthened our HR policy, health and safety, diversity and inclusion programs. and expanded compliance and anticorruption processes. These efforts were recognized with the EcoVadis Gold Medal that places us in the top 5% globally. Sustainability is fully embedded at Board and executive level with KPIs linked to executive compensation, both on short-term and long-term incentive plans. In short, for us, sustainability means resilience, control and disciplined execution, which is fully in line with our financial strategy.

Now on M&A. What we said at the time of the IPO is that our strategy combines both solid organic growth and targeted bolt-on acquisitions. Our ambition is to become the natural consolidation platform in electro-optics. We remain very disciplined in how we approach M&A. First, we look for high-value technological assets that complement our portfolio. When developing a technology internally will be too slow or too risky, acquisition allows us to accelerate while reducing execution risk. Second, targets must operate within our 4 core verticals: Defense and Surveillance, Life Sciences, Industrial Control and Nuclear and expand our addressable market while strengthening our competitive positioning. Third, we prioritize companies that have already reached industrial scale with proven customer references and leadership in their niche markets. That said, we remain open to earlier-stage players when the technology is emerging and strategically critical for the future.

So what do we bring to these targets? We bring a strong commercial platform to expand market reach, operational excellence in manufacturing and supply chain and a powerful technology base with deep R&D expertise and a robust patent portfolio. This result is -- the result of this is accelerated growth and a more diversified and resilient business model. Our D&I segment, for example, has grown from EUR 82.5 million pre-IPO to EUR 150 million today. And beyond growth, these acquisitions support margin enhancement and stronger cash generation through synergies and operational leverage, as you can see in the next slide.

Noxant, for example, which we acquired in 2025 is a very good example of what we aim to do with M&A with technology as a key decision criteria. It gives us double market expansion, both in Defense and Surveillance and in Scientific and Industrial Markets, and it increased our addressable market by around EUR 500 million. Noxant's revenue grew 52% versus 2024, benefiting from very strong tailwinds, particularly in long-range drone surveillance. So the momentum is clearly there. What's important is that we were able to accelerate production capacity expansion, thanks to Exosens' operational expertise and capital support. That's exactly where we add value, helping high potential technologies scale faster and more efficiently.

This concludes my remarks, and I will hand over to Jerome, who will discuss our medium-term targets.

Okay. Thank you, Quynh. Just briefly perhaps on our markets. So we are positioned on different markets compared when we look at the different, let's say, segments or businesses we're serving. Importantly, these markets for the midterm are seen to grow for light amplification and portable from 10% to 12% for industrial control, life senses transformation more in the high teens range.

But importantly, I wanted to underline that over the last acquisitions in the last business development initiatives we've taken, our addressable market has grown, which results in market share that, okay, for Amplification will remain as the #1 position with 80% market share, a very high market share. But for the other ones, position us well on growing markets -- in markets where we are expanding our addressable market. And I think it's important to mention that acquisitions do allow us to expand market -- our addressable market for the future. This market growth will be -- have been embedded into our outlook and which Quynh-Boi is now going to share.

So on the back of our very strong 2025 results, we are upgrading our '24-'26 guidance, which we initially provided in early January 2025. Clearly, the trajectory of the group today is stronger than what we had anticipated at the time of the IPO. For 2026, we now expect revenue in the range of EUR 520 million to EUR 540 million, adjusted EBITDA between EUR 168 million and EUR 178 million. So this implies a '24-'26 EBITDA CAGR of 18% to 22%, which is above the high teens growth we indicated at the beginning of 2025.

On CapEx, our industrial CapEx rate will be around 9% in the period, reflecting the additional capacity expansion that we announced in October 2025 to meet higher global demand. In addition, we will continue to capitalize approximately 3% of our sales to sustain our innovation and R&D efforts.

Now looking beyond 2026 over the midterm, we aim to grow sales organically on average up to the mid-teens. We expect adjusted EBITDA to grow above 15% per year on average, implying a gradual and disciplined improvement in EBITDA margin. And we plan to normalize industrial CapEx at around 5% of sales while maintaining R&D capitalization at roughly 3%. So overall, we are entering the next phase with sustained growth, improving profitability and a disciplined capital allocation framework.

Since the IPO, we have built a very solid financial structure, which puts us in a strong position to fund both our organic growth and continued investment in our industrial assets and R&D innovation. Today, with a leverage ratio of 1.3x our EBITDA, we have significant financial flexibility. This gives us firepower to accelerate growth through targeted value-creating M&A across our 4 vertical markets. As always, we remain disciplined and technology focused in our approach.

We have a clear ambition to reach EUR 1 billion in revenue over the midterm. To support that trajectory, we could temporarily increase our leverage ratio to around 2x adjusted EBITDA during the period. And finally, in line with our capital allocation framework, we intend to return between 20% and 25% of net income to our shareholders.

Thank you, Quynh-Boi. So overall, we combine growth ambition with financial discipline with a balanced capital allocation.

This concludes our presentation, and we are now happy to take your questions.

[Operator Instructions] The next question comes from Aurelien Sivignon from ODDO BHF.

A couple on my side. First, how should we think about growth by division in '26? I mean, do you expect Amplification to again outgrow the group? Or do you expect a more balanced profile given the strong year-end performance in Detection & Imaging?

So usually, we don't guide by segment. Having said that, you know that our limitation today is capacity. And the investment that we announced in 2025 in January and in October will not have immediate effects in 2026. It will be rather at the end of 2026. And as you also saw during this year, second half was much better than the first half with an 11% growth in D&I in the second semester. So what we expect is that indeed, D&I will continue to grow at a higher pace than what we have seen in the previous years.

Okay. Then on the medium-term plan, I was wondering whether your new top line growth target of 15% or let's say, up to 15% growth can be achieved within the existing capacity expansion plan? I mean, the plus 40% increase by next year or whether further investment will be required? And just to confirm, would you consider 2030 as a fair medium-term reason for this plan?

So our medium-term growth perspective in D&I is not affected by capacity in Amplification. We have plans today, as you know, to grow and to increase capacity that will be fully in place in 2027. We do not expect to increase further our capacity in 2027 depending on market demand.

Okay. Last one on M&A. Can you share more detail on the size of the assets you are looking for you are mentioning? I mean, if I understood correctly, you could exceed, sorry, 2x leverage threshold. But what would be the acceptable upper limit you would consider?

So indeed, what we have done so far is smaller size targets, roughly between EUR 10 million and EUR 20 million of revenue. This is what we closed in the last acquisitions. What we are looking for today is acquisition of larger size. Typically, it could be around EUR 50 million revenue or above. Knowing that we have a low leverage ratio of 1.3x our EBITDA, we have the full financial flexibility to fund such large acquisitions with debt.

The next question comes from Aleksander Peterc from Bernstein.

Congratulations for strong results and beating the guidance again. The first one will be just on the phasing of your medium-term targets. When you give us the CAGR for the next, let's say, 5 years, would you expect growth to be stronger at the beginning of the period and then fade? Or would you see a peak in revenue and EBITDA growth at a given point given your CapEx phasing? That would be my first question.

The second, after the Microwave disposal, is your lineup of businesses now satisfactory? Or do you see any other areas that may need attention that could be disposed of? Are you happy with your perimeter, so to say?

And the third one, I'm just wondering what kind of opportunity would make you crank your leverage up to 2x or even slightly above? Would this be a single large acquisition? Or do you -- would you see a string of acquisitions in short succession? And while we talk about that, could you update us on your pipeline of M&A opportunities at the moment in terms of number and size of targets?

Okay. In terms of phasing of growth, obviously, we do not have exactly the same dynamics between our segments. D&I is seeing for its defense portfolio, a strong growth coming from drone counter drones, but also missile warning systems that is there and in line with the different budget growth. The industrial markets are very different dynamics which we will see continuing or growing together with the general economy, as the general economy is growing. And it is expanding, let's say, on a regular basis over the next few years.

Amplification is more driven by capacity. And there, while we are still questioning ourselves as we do all the time, whether we should -- we have to increase more or we can increase more. Obviously, we have already achieved a huge increase in capacity, and we do not foresee in the future the same level of growth than we had 2, 3 years ago at 30%, 35%. So all in all, we think it's a balanced growth that we are seeing, but the capacity -- while the capacity increases will kick in, we will probably come on a more normalized level in that part of our business.

On Microwave Amplifier restructuring, there is not a single business that was at the level of Microwave Amplifier. So all our remaining business are profitable. But we will constantly review our portfolio to make sure we allocate capital on businesses that have the highest growth prospects and profitability prospects.

And so on M&A, in fact, as we already stated in the past, we are constantly looking at different types of companies. We have a portfolio, smaller ones, larger ones. And we first drive it by technology. So we are very interested in developing business, enlarging our technological portfolio first. Second, enlarging our markets in our 4 verticals and our accessible or addressable market in our verticals. And third, looking at companies that generate synergies with the group. We will continue that strategy that encompasses, in fact, a larger, let's say, span of companies, smaller size, but also larger size. They can be of any type as long as these criterias and very strict criterias are met.

[Operator Instructions] The next question comes from David Perry from JPMorgan.

Jerome and Quynh-Boi, congrats on a great year. A few questions. Sorry if I missed it. Can you just clarify what your definition of midterm is, please? Apologies if you did say it, the line isn't so great. Secondly, I'd be interested to know what percent of Detection & Imaging sales now or in '25 were actually to defense? And how do you see that evolving? Because it feels like the D&I story has really changed quite a bit maybe since the IPO with a lot more defense in it.

And then just curious on the German contract for image intensifier tubes. I mean, it's absolutely huge for a 3-year delivery program. So it's quite a significant piece of the sort of expected sales sorting amplification. Does that limit your opportunities to sell to other customers? Or should we think of it more as a positive that you could do better overall?

So concerning our midterm outlook, I think at the time of the IPO in 2024, we guided until 2027. 2027 is now much closer. Obviously, the world has changed. And so we thought it was time to change our perspective for midterm in line, let's say, with -- in line with these changes. So we do not define midterm precisely, but obviously, in 2024, we were guiding only until 2027. And you were telling us that you were expecting us to upgrade it, so we decided to do it.

Sorry, sorry, can I just follow up? So I mean, a lot of your competitors or peers, say, the Germans, they define the midterm as 2030. I mean could we assume that? Or is that too much?

I think -- as I stated in 2024, we guided until 2027 though we didn't define what midterm was meaning exactly, we could assume that we show a certain consistency with our previous communications.

So D&I accounted for 1/3 of our -- defense accounted for 1/3 of D&I business. And contrary to amplification, we have no capacity issues in this segment. So if the bulk market is booming, then we will be able to meet market demand.

And that's very clear. So defense being 1/3 of D&I is -- to me, is a big change in the story of a few years ago. I mean, do you see that given all those opportunities you talked about in your slides, surveillance and drones and missile warning, I mean, do you see defense going to 50% of D&I?

No.

No, we don't believe so. Do remember that we were hit in the previous year with a slowdown in machine vision with China slowdown, also with tariff uncertainty and research budget funding cuts. This is temporary. We know that the underlying market dynamics are still there. And at one point in time, they will recover.

Okay. And concerning your last question on German contracts, the German contract, we were very happy we could secure with OCCAR and actually OCCAR secured it with you, we are the only provider of 16-millimeter tubes for them. We -- they will represent about 35% around-ish, let's say, of our revenues on the horizon. So that does not really limit the opportunities we have to develop any other type of businesses. Of course, all opportunities are limited by capacity, but we can serve customers simultaneously.

Importantly, also with the emergence of 5G and the continuation of a growing demand on 5G and new technology, and we expect that this will allow us to develop more opportunities. We are developing these opportunities today, for example, with Theon, that is already a customer of 5G. And so we expect that this 5G will take more importance in the future as part of our portfolio while we are ramping up industrial learning curve.

The next question comes from Aleksander Peterc from Bernstein.

Apologies, jumping back into the queue questions with a small detail on the gross margin in Amplification in Q4. It seems that it dipped from over 50% in previous quarters to low to mid-40s. Is that the effect of 5G? Or is there anything going on there? And should we expect the same into the beginning of 2026 at least?

No, it's the impact of NVLS, the acquisition that was fully loaded in Q4.

Okay. That's very clear. So none of that effect coming into '26 then?

No.

[Operator Instructions] The next question comes from Sriram Krishnan from Deutsche Bank.

Can you hear me now?

Yes.

Yes.

I had a question with regards to the U.S. Army by BiNOD program. Can you give us a bit more color on what is the size of this contract, which is being currently bid for? What's the time line? Who are you competing with in this sense? Have you already tied up with someone like Theon? Can you give us a bit more color around that entire program? That's the first one.

And probably a very related one with regard to the CapEx. Now we know that you have -- you are spending a lot more on the U.S. part of the business as well. If you actually win a part of this buyer program, how much CapEx would more be required to address that kind of a demand going forward?

Okay. So the U.S. Army BiNOD program is ongoing as you stated it. It is not -- it's in the process, and we are participating in this process. We expect that the final decision will be taken in the course of the year. We also expect that there will be more than one selected parties in the year end. And it is a program that is about 42,000 binoculars, I think, but it will be the [indiscernible].

And as you know, you start these type of programs being -- well, knowing what the contract is about, but then every year is different or can be -- let's say, it can be different. So we expect that this program will be a sizable program for the coming years. However, the process will not be reached -- the end of the, let's say, the decision process in our view will not be reached before, I would say, midyear, somewhere midyear.

The rest of your question was concerning CapEx in the U.S. We set up the minimum viable size for a factory in the U.S. So with a capacity of 10% to 15% of the total. But it is a factory that is a new factory, that is scalable. So we are really there when time comes and when business is developing, not only because of BiNOD but -- also because of BiNOD, but not only because of BiNOD.

If that ever comes, we are ready to invest more if we need to increase our capacity in the U.S. it can be scaled up. Now I think in the past, you saw the type of investment we had to make to increase our capacity by a certain percentage. As a matter of fact, the big step was indeed to set up -- to decide to set up something in the U.S. That was a big step. The following stages will be more similar to what we've been doing in any other factory, especially in Europe.

Sorry, the line wasn't great, pardon for that one. So did you say 42,000 binocolus or 42,000 tubes?

Binoculars. I said binoculars.

The next question comes from Valentin-Paul Jahan from Stifel.

Do you hear me well?

Yes.

Yes.

Perfect. And sorry, if I missed one of the answers, but the quality of the line wasn't very good. I have the 3 following questions, please. The first, can you give us more details regarding the growth in Amplification in Q4? It is only 2% organically achieved due to the fact that you have been -- is it due to the fact that you have been limited in terms of capacity or mostly you delayed deliveries into Q1 2026?

The second question is around the gross margin in Amplification. Still in Q4, can you elaborate a little bit on why it is only 45%, while it was 51% in Q4 last year? And while you divested the loss-making Microwave Amplification activity, it should have benefited from a positive product mix effect. What was the headwinds here?

And third, in terms of long-term strategy, do you still want to develop the nondefense activities faster than defense activities, thanks to M&A to build a more balanced 2-leg business model between defense and civil markets? I understand that it is no longer the priority given the current momentum in the defense sector, I am right. Can you elaborate, please, on this also?

So growth in Amplification, the 2% organic growth in Q4. As you know, we have reached our maximum capacity already at the end of 2024. So as you remember, Q1 of '25 was not showing growth versus Q4 of last year because we had already reached our limited capacity. So this was expected. The growth that we had in '25 versus '24 is due to the fact that we still had a ramp-up in 2024. So Q1 of 2024 was lower than Q4 of 2024. And we also increased capacity -- we also increased our volumes in 2025, thanks to yield improvement and thanks to operational processes improvement, but not coming from investment in capacity.

The benefit of -- the effects of the investment capacity will happen in 2026 and the second half. And on top of that, you know that we also deliver equipment based on -- mostly based on point in time revenue recognition. So when shipment is not complete, we cannot ship it. So it might happen as well that in Q4, we could -- we have produced equipment that we could not ship because of our import terms. Gross margin amplification in Q4, the main reason for the decrease is the fact that almost all of NVLS sales was in Q4, so being dilutive to the rest of the group.

No impact -- this is not coming from the divestment impact of macro amplifiers because we applied IFRS 5, which means that M&A was already restated from our 2024 gross margin. And the long-term strategy, D&I on defense or nondefense, this is not how we look at M&A. The first criteria to look at M&A is technologies. And as you can see in the previous examples of deals that we closed, most of the time, these technologies are dual use. So they address both Amplification or Defense markets or Industrial and Commercial markets. What we aim for is really technology and to build a resilient model.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you again for joining us today. Should you have any further questions, feel free to reach out to us. In the meantime, I wish you a very pleasant day. Thank you.

The conference is now over. You may now disconnect.