Earnings call transcript: Avio S.p.A. Q2 2025 sees strong growth, stock dips

Avio S.p.A. (AVIO), with a market capitalization of $1.1 billion, reported its second-quarter 2025 earnings, highlighting a robust financial performance with a 30% increase in revenue and a 55% rise in EBITDA compared to the previous year. Despite these gains, the company’s stock price experienced a slight dip of 1.27% during the open market, closing at 3.12 per share. The results included an earnings per share (EPS) of -0.42, and the company maintained its full-year guidance. According to InvestingPro analysis, the company is currently burning through cash quickly, though its liquid assets exceed short-term obligations.

Key Takeaways

• Avio’s revenue grew by 30% in the first half of 2025.
• EBITDA increased by 55%, driven by higher revenues.
• The company confirmed its full-year guidance.
• Stock price fell by 1.27% despite strong financial performance.
• Avio is expanding into the U.S. defense market.

Company Performance

Avio S.p.A. demonstrated significant growth in the first half of 2025, with revenues increasing by 30% compared to the previous year. The company’s EBITDA saw a substantial rise of 55%, indicating strong operational efficiency and higher revenue streams. InvestingPro data shows the company maintains a strong financial health score of 2.54, rated as "GOOD," with particularly high marks in price momentum. The order backlog reached €1.7 billion, with an additional €0.2 billion added after the reporting period, showcasing the company’s strong market position and demand for its products.

Financial Highlights

• Revenue: €445 million, up 30% year-over-year
• EBITDA: €30-€36 million, representing a 55% increase
• Net cash position: €75 million as of the end of June

Market Reaction

Despite Avio’s strong financial performance, the stock price decreased by 1.27%, closing at 3.12 per share. This movement contrasts with the company’s robust growth metrics and may reflect market volatility or investor concerns over the EPS results. The stock currently trades within a 52-week range of 2.02 to 4.44. Based on InvestingPro’s Fair Value analysis, the stock appears overvalued at current levels, despite an impressive YTD return of 156.49%. Subscribers can access detailed valuation metrics and 6 additional ProTips for deeper insights.

Outlook & Guidance

Avio has confirmed its full-year 2025 guidance, expecting revenue between €450-€480 million and net income of €7-€10 million. The company is targeting a 10% revenue growth over the next decade and aims to increase its defense revenue from 20% to 50% of total revenue. Analyst consensus maintains a positive outlook, with EPS forecast for FY2025 at $0.54. Avio is also planning a €400 million capital increase to support its growth strategy. Get comprehensive analysis and detailed forecasts with InvestingPro’s exclusive research reports, available for over 1,400 stocks.

Executive Commentary

CEO Giulio Ranzo emphasized the strategic importance of entering the U.S. market, describing it as a "once-in-a-lifetime opportunity." He also highlighted the company’s preparation for full-rate production by 2028 and the readiness to commence investments.

Risks and Challenges

• Supply chain disruptions could impact production timelines.
• Market saturation in the space launch sector might limit growth.
• Macroeconomic pressures could affect defense spending.
• Currency fluctuations may impact financial results.
• Regulatory changes in key markets could pose challenges.

Q&A

During the earnings call, analysts questioned Avio’s plans for expanding beyond current contracts and its approach to vertical integration. The company confirmed strong commercial momentum in the defense sector and expressed flexibility in pursuing growth through organic investment or potential mergers and acquisitions.

Full transcript - Avioane Craiova SA (AVIO) Q2 2025:

Nevio, Conference Host/Moderator, Avio S.p.A.: Good morning. Good morning, everyone, and welcome to this conference call. We are very, very excited today since we are not only announcing our first half 2025 results, but also our strategy for future growth. I’m here, as usual, with Mr. Giulio Ranzo, CEO of Avio S.p.A., and Mr. Alessandro Agosti, CFO. In a moment, we will go through the presentation we prepared. As usual, at the end, we will more than welcome your questions. Thank you for your attention, and I leave the floor to Giulio.

Giulio Ranzo, CEO, Avio S.p.A.: Thank you, Nevio, and good morning to you all. Thank you for joining this important call. As Nevio was saying, the plan is to walk you through the highlights of the results of the last six months, but also a heads up on the recent announcement of the proposal of a capital increase to support our growth strategy. Alessandro, our CFO, as traditionally, will go over the details of our six months’ results. Let me jump directly to page five with a quick update on the business and of our financial performance. Going through the space sector first, where we successfully completed Vega’s 27th mission, very successfully. We are on track now to deliver four launches in 12 months, which was an important target to grow our flight rate, as you know. There is one other flight coming by the end of November, give or take.

We are on track to essentially grow the flight rate as we expected. In parallel, Ariane 6 flew successfully its second mission this year. There are more missions coming by the end of the year. The Ariane 6 flight rate is picking up, as we had anticipated and worked hard together with the Ariane Group. In parallel, we also report the successful firing tests of the P160C, which I recall will be the new first stage for both Vega-C and Ariane 6, and of the MR10 flight model, liquid oxygen maintained engine that we plan to fly for the first time next year. Important developments also on the research and development side.

In parallel, as we had anticipated to you earlier this year and last year, we have finally been formally designated as Vega’s launch service provider by the European Space Agency member states by way of a new so-called launcher exploitation declarations that the participating states to the European Space Agency have successfully voted. In parallel, and very importantly, the French government has released to Avio S.p.A. a 10-year administrative license to operate as Vega operator, launch operator, from the Guyana Space Center, which was another important bit, finally completing the puzzle of all our authorizations to operate autonomously the Vega-C launcher. Very important completion of a long process that has taken years to complete, I would say. On the defense side, more news even after the end of the six months’ period, additional $60 million orders signed with MBDA and some other $30 million orders with other defense customers.

Most importantly, I would say we also signed and announced in August a multi-year supplemental agreement with the U.S. Armed Forces to provide capability and industrial capacity for manufacturing, assembly, integration, and testing of tactical missiles, so solid rocket motors. This is very relevant. It follows initial activities of research and development that we had reported to you. Now we are talking about a much longer and relevant industrial commitment. On top of that, we are observing continued momentum on U.S. defense market growth and demand following, obviously, these things that we reported to you from Raytheon and U.S. Army. We do have a lot more in the commercial pipeline that we are working on, and we continue to see this huge momentum in demand for defense, very substantial, especially in the U.S., but not only in the U.S., also in Europe.

Coming to the financials, the order backlog at the end of the first half stood at about €1.7 billion, but it’s fair to report that shortly after the end of the first half, we added another €0.2 billion worth of orders that are therefore not in the numbers right now, but they are in our accounts. That’s very relevant, and we wanted to report this to you. In the first half, revenues grew 30% with respect to last year, and EBITDA grew by 24%. As you know, we were committed to growing both on the top line and on the bottom line. I think we are delivering on this promise, and therefore we feel confident to confirm the fiscal year 2025 guidance, as we had anticipated to you earlier this year.

Switching gears on page six to the proposal of the capital increase that we announced, let me give you the headlines on this. Our Board of Directors has unanimously approved this plan to essentially grow our financing sources to support a more ambitious growth plan, more ambitious than we had anticipated, both in the U.S. and in Europe, in particular in the U.S. Let’s come to the details of that. The capital increase we did, the Board has unanimously proposed to shareholders, will be executed by way of a rights offering for a total maximum amount of €400 million that is expected to be completed by the end of the year, and that is backed up by a pre-underwriting commitment with two financial institutions.

Further financial resources may also be potentially available via the fact that the board requested the shareholders to also vote on the renewal of a provision existing formerly in our bylaws that allows the board to issue an additional 10% of the share capital on a non-preemptive basis should we have the need for further flexibility on financial resources to fund this growth. As you can see, the board requested substantial firepower to grow the financial capabilities of the company in light of a significantly larger than expected market growth opportunity. The way we intend to use the proceeds is first and foremost to follow on the Avio U.S. growth project that we had anticipated to you, that is to establish a U.S. industrial presence for both engineering and manufacturing of solid rocket motors for defense applications, which we expect to be operational by 2028.

We had anticipated this project to you, reported to you on progress all along. Now we believe to be in the condition to launch this and make it happen. In parallel, we think we also need to enhance the European manufacturing base, secure that both in space and defense, we can feel the right investments in new propulsion technologies, new production assets to ensure the rapid growth in the volume throughput that you are actually observing as we speak, and also potentially some vertical integration to fine-tune our tech-level capabilities. A lot of stuff on the table, but in a way, this was anticipated to you over the last several quarters as we essentially built this strategy that is now coming to a point where we can successfully execute it.

We’ll come back to this in more detail with a detailed section, but let’s review a little bit the highlights of the first six months now. Moving to page seven, what are the key facts of 2025? First and foremost, launches of Vega-C. We launched two times. Importantly, with the last launch of CO3D and MicroCarb, we executed a quite complex flight with five payloads at the same time on two separate orbital planes with a very successful and accurate orbital injection. I think the customers are satisfied, and this is the most important thing. They are realizing that we are picking up speed with flight rate, which is exactly what the market wanted to see. In parallel, the same thing happened on Ariane 6. Ariane 6 performed two flights, long awaited, very successful performance of the launcher.

We had no doubts about it, but of course, now we can report we have successfully delivered against that. As I anticipated earlier, we also closed the loop on all of the needed agreements, arrangements, and such to make sure that we can operate Vega-C as a launch service provider and launch operator. On the defense side, we achieved incremental contracts with MBDA in Europe and with the U.S. Armed Forces, as I just said earlier. Also important that we completed successfully the P160C firing test. This is extremely important to provide incremental payload performance to both Vega-C and Ariane 6, and opens up to further competitiveness of these two launchers because we will have essentially more payload capacity at equal cost. It’s a huge competitiveness improvement. The motor fired very successfully. We’re very happy about that.

In parallel, you know that we’re placing efforts to develop our liquid oxygen engine technology for Vega E’s upper stage and for our in-flight demonstrators. We successfully fired the first flight model, and it fired successfully. That’s making one step closer to our finish line. Moving to page eight and quickly looking at the manifest of Ariane and Vega, as you can very well see, 2025 flight schedule will be way more busy than 2024. As I said, on the Vega side, we are preparing for our third launch before the end of the year. Ariane 6 is preparing for more launches by the end of the year, still unannounced how many and when, but I can tell you the situation is getting quite busy at the launch site.

We continue to retain a substantial backlog on both Ariane and Vega, and on both Ariane and Vega, we do see a lot of commercial momentum. There’s a lot more stuff in the commercial pipeline of both that we hope to be able to announce soon in the form of new contracts to be signed for the next few years. I would say very positive developments on the outlook of these two launch services. On page nine, as I said, the Vega-C VV27 mission was interesting and successful. Pay attention to this because what the customers are discovering is that this launch system is extremely accurate in delivering satellites where they are supposed to be going. That provides us with a unique capability that is more and more being recognized by customers. I can tell you customer satisfaction is, for us, the most important reward to the efforts we placed.

I believe that with this mission, we achieved a lot in this direction. Equally importantly, I would say on page 10, the second mission of Ariane 6, which was essentially the first commercial flight delivering MATTOB SGA-1 into orbit for UMACSAT, was also very important because at the end of the day, Ariane 6 was a long-awaited new launch service capability in Europe for heavy payloads, and the Ariane Group delivered this successfully. We are honored to be providing the boosters of the first stage, which performed extremely well. We also provided liquid oxygen turbopumps for the core stage. They all performed very well.

I think we value, and we are very happy about our partnership on a larger launcher that allows the company to be exposed to a slightly different market segment in the launch market that is picking up very quickly, as you know, as a result of the huge demand for launch of satellite constellations, which is something different than what we do with Vega. By providing a propulsion system to Ariane 6, we get exposed to the best of both worlds, to the Earth observation satellites with Vega and to the telecommunications satellites with Ariane 6. Very positive development on this front. On page 11, just real quick, I mentioned that before. I know it would sound to some of you a bit boring what I’m saying here.

We got all of the necessary authorizations, but in our business, which is a very complex one, you cannot operate unless you are properly authorized to do so. We are running risks for what we do. This is the first time another operator is actually authorized in Europe to launch anything into space. It is a very important moment in the European space industry. We are de facto moving Avio to become the second operator in Europe, fully authorized by institution to launch payloads into space from the Guyana Space Center. On page 12, as I reported to you earlier, there is definitely an acceleration in the defense business growth. Not that we had not anticipated that to you. I think we had highlighted that to you several times, but we are now demonstrating that this acceleration is real.

As you can see, both in Europe and in the U.S., we continue to receive incremental orders. Following the various things we had done last year with RATION, with U.S. Army, and MBDA, we reached more orders with MBDA and probably more to come in the near future. A substantial extension of our agreement with U.S. Armed Forces to deliver multi-year manufacturing, assembly, integration capabilities for solid rocket motors. These, I have to tell you, given the magnitude of these orders, provided us with the confidence that the growth path we had imagined is actually real and probably bigger than we had anticipated, quite frankly. That is the reason why it made us reflect on the fact that we could not hesitate on growing the capital base and making sure we could follow up very quickly with the right investment to capture this growth.

Actually, if you look at page 13, just going back to basics, you look at the left side of the chart, you see how our order backlog developed in the defense side of the business. You can see that that picked up pretty quickly. This is the firm orders, right? This is the only portion of the growth, the small portion of the growth that is guaranteed because it’s under contract. Now, you look at the situation of the first half 2025. It’s about $400 million. We put another $150 million in just two months. This is picking up so quickly that we inevitably drive the demand for our production rate to ramp up super rapidly.

This is the reason why we ought to be having financial resources available to invest quickly in production assets, tools, and means to make this growth rate happen safely and professionally, both for the demands coming from the U.S. and from Europe. This is essentially why we accelerated on the growth strategy and funding. Now, coming to this point, I think we ought to be dedicating some time to this. We will take more time in the next few days and weeks, maybe with a specific event to inform you about that. Let me give you a little bit of the background first of our growth strategy, and then we’ll come to the logic of the funding. Just a quick recap on page 15. Both in the space and defense market segments that we follow, there is definitely a market growth tailwind.

This is evident because if you look at the graph on the top here, here’s the best estimate of the loan demand for the next decade that we could gather. You can see that there is a substantial growth expected. These growth expectations have always been beaten by actuals. Every time we project the growth, actuals end up being more than we had anticipated. We can only project you the growth prospects that we found from reputable sources. Here you can see that big constellations would drive most of the demand, but there is this tiny light blue portion, which is the non-Starlink mega constellation, so to speak. This will experience a substantial growth of probably 30% compound growth rate over the next decade, which is huge.

That contains projects like Amazon Project Kuiper, to which Ariane 6 is obviously part, as they have booked some 18 flights for Project Kuiper that we will serve by providing solid rocket motors for Ariane 6. On our segment, which is for Vega, the non-mega constellation, the growth rate, nominal growth rate appears to be slower, but what we are experiencing actually in the book of business is way, way more than anticipated. This you will see, quite frankly, from the upcoming announcements of further sales on launch services. Not very many doubts on the fact that the launch demand continues to be more than the supply. Therefore, we need to be able to feel the right capability to deliver against this market demand. When it comes to the general dynamics of the defense business, I don’t have to explain much here.

Defense budgets within NATO members, and in particular in the U.S., will be growing very rapidly across the decades. There is plenty of confirmation about that. The NATO members have jointly decided to raise the bar substantially in Europe, substantially to increase the defense spending as a proportion to the GDP. The U.S. has reached unprecedented value in the defense budget. You know that with the recent upgrade of the U.S. defense budget, they are largely past the trillion on annual budget for defense. I don’t need to convince many on the fact that demand for defense procurement over the next decade will be extremely substantial. The current situation of ongoing and unfortunately enduring conflicts around the world unfortunately consumes a lot of defense systems. As such, the demand is also growing because the gap between supply and demand is widening every day.

When it comes to this point on page 16, if we zoom in a little bit on the defense side of the story, we believe this is the right time to capture the opportunity. This is a once-in-a-lifetime opportunity to enter the U.S. market for us. If you look at the top side of the chart here on page 16, this portrays how many missiles are essentially manufactured every year in Europe and in the U.S. It’s about 26,000 missiles. Most of them are in the U.S. More than 20,000 in the U.S., about 2,500 in Europe, give or take. Okay, now that turns when you look at the portion that is relevant to us, the missile propulsion business market value, that turns into a $0.2 billion opportunity in terms of total available market in Europe, as opposed to $1.7 billion in the U.S. Okay, so the U.S.

market for what we do, which is missile propulsion, is 10 times what it is in Europe. We ought to be entering this market. Now, why do we have to enter now and why do we have a chance? First of all, this market is reported to be growing over the next five years at a rate of about 8%, which, as I told you, is way less than what is happening, right? Sources that report expectation and forecast for growth on the defense side cannot take into account some of the things that are happening and that are shown on the bottom right side of this chart, which is not only the expectation for growth in production rates, but the fact that there is a growing gap between demand and supply. Every year, we see this represented by the number of tons of propellant that should actually be manufactured.

You see that there is an imbalance every year of 3,000 to 4,000 tons worth of propellant that are not cast into missiles and actually should have been. If this gap continues to stay for another five years, then the growth will far exceed the projected growth rates that we see in this page because the production cannot nearly meet the demand that is expected. Not surprisingly, there are many other parties that are trying to present themselves with projects to fill this gap and to capture an overproportional growth rate. We think that the opportunity to enter the U.S. market exists. We have been working on it over the last three years, as you know, but we think now it’s the time to fire, to be serious and invest, get ready, and deliver against the promise.

In fact, on page 17, to this end, we had started to work on multiple customers. As you know, more than three customers are having discussions with us on multiple programs, and we have plans to build a factory of no less than 700 tons of propellant annual production capacity, obviously with the flexibility to be potentially upgraded even to a larger one should even more opportunities become available. What’s key in this story is that we have to be ready by 2028. We need to field all of our efforts to make sure we have the right production capacity in place in just three years, and then we also build an engineering capability to go hand in hand with that. The idea is to position ourselves as a merchant supplier for solid rocket motors for all of the U.S. primes and for U.S. Armed Forces as well.

We have identified a manufacturing site in the U.S. and secured an option for that to be available exclusively to us. We have advanced with a design and procurement plan, and we were waiting to essentially have the financial resources to kick off activities. In parallel, as you know, we have now secured a number of contracts with the U.S. Armed Forces and with RATION that very much go in the direction of us then being able to manufacture by 2028. We are essentially maturing all of the design and qualification activities that anticipate full-rate production by the end of 2028. We are having discussions also with other primes because there are multiple programs suffering from the same issue of an undercapacity vis-à-vis the demand. We also are discussing with further international defense customers to potentially receive manufacturing in the U.S.

We think this was sufficient for us to get ready and commence the investments. In summary, on page 18, what do we see for the next decade? First of all, why do we look at the decade and we don’t look at the next 36 months? As you can very well grasp, this is not a short-term strategy. This is a long-term commitment. It takes three years to build a factory. It will take time to invest also in Europe to upgrade our capabilities and secure performance. We do have visibility across the decade. What we plan on doing is to maintain a growth rate of about 10% on revenues across the decade, across which the exposure to defense will grow. There will be a rebalancing in the mix of our revenues between space and defense.

While we have today that defense accounts for about 20%, probably by the end of the decade, it will be close to 50/50 between space and defense. We will also have that revenue mix, which is currently shared between production and research and development activities, will focus more on production as a result of our strategy. Obviously, given the U.S. project, revenue mix will shift a bit more towards the U.S. while maintaining a very substantial presence in Europe. In terms of the profits, we expect to be able to exceed a 15% compound annual growth rate across the decade in ways and forms that we will explain to you better in an upcoming event, maybe in detail. What we aim to do is to increase the quality of earnings. What do I mean by that?

That we will have exposure to two different markets in two different economies with two different growth drivers. What will happen is, therefore, that risks will be diversified across different dynamics. We think this will be beneficial for all investors because they will have a bigger pie, more diversified, and therefore more risk-adjusted in a way. As I said, we’ll provide more details as soon as we have the time to arrange for a dedicated event on this topic. To just wrap this up, on page 19, we think this is a time of unique opportunity for Avio and for Avio investors to capture the new stage of growth. As you know, we come from a decade when actually I was CEO and we have doubled revenues, doubled orders, doubled the employment base. We have delivered a doubling in a decade.

Now we are optimally positioned to scale up to a completely different size, and both in space and defense, beating on a track record of success, which makes us credible to actually achieve such targets. The opportunity for investors is to get exposed, as I said before, to a company that is present, will be present in the U.S. and in Europe, in space and in defense. There are two domains that are crossing each other’s paths at the moment. As you can very well see, they are completely entangled. We will be an industry-leading solid rocket motor provider capable to enter the world’s largest market in this sector. We also want to maintain market leadership in developing new propulsion technology.

This is why both in defense and in space, you are seeing that we are investing time and money to develop liquid oxygen maintained, to develop new solutions for solid propulsion. This is exactly why we need to maintain our know-how gap big enough with respect to anyone else in the competition. We need to execute on these long-term commitments, satisfy the need of all of the customers, and along the way, grow our backlog to provide the investors with visibility on this growth path. When we look at something that is projected across 10 years, one would say, "Okay, how do I know that this will happen?" The way you will measure whether we can achieve that or not will be the speed at which we can make the order backlog growth. That is the primary driver of certainty around visibility of future revenues and therefore future earnings.

That’s in a nutshell what we are doing right now. I will now leave the word to Alessandro to cover the details of the first half financials, and then we’ll open to questions. Thank you. Alessandro, to you. Thank you, Giulio. Good morning, everybody. Shall we move to page 21? We reported on the backlog evolution over the last six years, which showed a compound annual growth rate of higher than 20%. End of first half 2025, backlog is almost €1.7 billion, substantially in line with 2024 year-end. Maintaining the highest level of the company history and about four times the yearly revenues, thus providing strong visibility in the medium term. In the first semester, order intakes amounted to approximately €180 million. This includes a major portion of €150 million related to launch service provider activities for contract transfers by Ioannis Karyotis to Avio S.p.A.

following the European Space Agency Council meeting on 7 November 2023, €15 million for replaceable distribution for ramp-up in production of P120 motors, and defense propulsion orders for about €10 million. Following such intakes, Vega backlog represents more than 50% of backlog and defense propulsion 25%. Defense backlog, as Giulio mentioned before, is more than three times at the end of June of Ariane backlog, waiting for the ramp-up following the successful maiden flight of Ariane 6 in 2024 and the first two successful flights in March and August 2025. Production backlog is about 60% and development backlog is around 40%. Here, we would like to also point out that after the end of the first half 2025 up to now, order intakes additionally increased by about €200 million, including defense production order, U.S. and Europe, for €180 million, and Vega development orders for about €20 million.

Shall we move to page 22? We reported the revenue, which significantly increased by about 30% compared to the first half of the previous year. Such increase has been principally driven by Vega production, driven by cadence increase following the return to flight, and Ariane 6 production with P120 motors and turbopumps. Following the maiden flight in 2024 and the first two commercial missions in March and August 2025, as well as defense propulsion development and production. 60% of revenue comes from production and about 40% from development activities. Revenues from production, you can see on the right side of the page, grew by about 50% principally for higher Vega production activities. On page 23, we reported the main financials of the first half compared to the corresponding first financials of the first half of 2024.

As we said before, we experienced a significant increase in revenues, higher than 30% versus the first half of 2024, which has been principally driven by Vega production for carriage increase following the return to flight, higher production rate of P120 motors and turbopumps, as well as higher defense production and development activity. EBITDA reported increase by about 55% and has been driven by higher revenue, partially offset by higher energy costs in the first half of 2025. As you can see, non-recurring costs are higher than the first half of 2024 for certain incentives for personnel to retire payments. However, non-recurring are significantly lower than in the past. The process costs for the cost of exploration of new potential businesses in the U.S. are now accounted for as a recurring cost upon completion of the startup phase of this business.

EBITDA increased compared to the first half of 2024 despite higher depreciation, mainly for investment in new IT technologies, particularly artificial intelligence, as well as certain lease assets. Profit before tax increase is higher than EBIT thanks to interest income for higher average of cash balances available during the first half, which have been invested in short-term time deposits. Finally, net income shows lower taxes for higher non-deductible costs in one first half of 2024 as a non-recurring taxable item. In the midterm, we expect an increase in taxable income, but we will continue to benefit from the per tax asset on tax losses to pay forward, driving an effective tax rate of about 19-20% on the longer term. Shall we move to page 24? We reported our source and usage at the end of June compared to the end of 2024.

As typically in our business, working capital is structurally negative thanks to cash advances from orders intakes. Fixed asset changes mainly related to CapEx for IT improvement projects, and as we said before, new technologies such as artificial intelligence, as well as a recurrence increase net of the depreciation on the first half. Net cash position is higher than typically seasonality trend in the middle of the year for certain delays with a timing effect in slowdown of cash advances to suppliers and subcontractors, as well as for about €10 million of cash in from conversion of Space Holding warrants in June 2025. Shall we move on page 25? We reported the net cash position dipped between December and June.

Typically, in the first semester, there is a reduction in the net cash position as a slowdown of to suppliers and subcontractors, cash advances received towards the year-end of the previous year. In this first semester, there’s been a certain delay in such slowdown with timing effects, which resulted in a net cash higher, a little bit higher than expected. In addition, the conversion of the mentioned Space sponsor warrant by Space Holding added to the net cash position. We ended up at €75 million at the end of June. In page 26, we reported the quarterly evolution of EBITDA and net cash position. As you can see in the bottom part of the page, there’s fluctuation across the last year in the net cash position, which, however, at the end of the year is expected in the range of €20 to €30 million.

The upper part of the slide also shows the quarterly part of EBITDA reported, which confirmed the concentration of the contribution towards the last quarter of the year as typical. Finally, on page 27, we reported the guidance as a consequence of the result of the first half. We confirmed a full year 2025 guidance. In particular, order backlog between €1.7 and €1.8 billion, with growth mainly in new orders from defense propulsion. Revenue between €450 and €480 million will grow in defense propulsion activities and in Vega production. 2024 and including business development costs of up to U.S.A. These implied an EBITDA adjusted ranging between €30 million and €36 million, assuming €3 million of non-recurring costs. Finally, net income is between €7 and €10 million, with a 30% growth versus 2024, also considering a higher tax charge versus prior years. Okay, I finish my financial section.

I leave you back to the floor, Nevio. Thank you.

Unidentified Moderator, Avio S.p.A.: Thank you, Giulio. Thank you, Nevio, for such a comprehensive discussion. Thank you, Giulio. Thank you, Alessandro, for such a comprehensive discussion. Now we will welcome your questions. Thank you.

Conference Operator: We will now begin the question and answer session. To enter the queue for questions, please click on the Q&A icon on the left side of your screen. When announced, please click Continue on the pop-up window. If you are connected in audio only, please press Star 1 on your telephone. The first question is from Martino Deambroggi of Equita. Please go ahead.

Alessandro Agosti, CFO, Avio S.p.A.: Thank you. Good morning, everybody. My first question is on the CapEx plan. You’re raising a huge amount of money. Just to have an idea how it is split over the 10-year period, and if you could provide an indication of the different purposes. I suppose the majority is for the increasing capacity in the U.S., but if you can elaborate on this, it would be helpful. The second question is on the operating leverage, because if I take the floor of your EBITDA growth, 15%, it appears quite low compared to the top line, and particularly to the defense business growth that presumably is much more profitable than the rest of the business. Just to have an idea, if this operating leverage is affected by any, I don’t know, a mix effect in the launcher’s activity that probably offset the potential benefit from the mix of higher defense.

Third, when you talk about vertical integration, you are just referring to the 10-year administrative license for the launcher’s operations, or are you also planning any potential M&A deal acquisitions in order to fill in the pieces of the Vega that you do not produce being a prime contractor? Thank you.

Giulio Ranzo, CEO, Avio S.p.A.: Thank you, Martino. I will try to provide you answers, and then maybe Alessandro can integrate. In terms of where we plan to invest the money, we have illustrated to you at a high level where we plan to use the proceeds also of additional capital. It is clear that a substantial portion will be devoted to the U.S. project, as we had anticipated in the past, and another maybe lesser portion, but not less important, to European activities to support growth. In terms of what we spend this for, of course, in the U.S., we spend it for a plant, and for growing in general our capabilities. In Europe, to complement what we do in terms of investments that are also covered by government grants, European Space Agency funds, and funds coming from defense customers, and so on.

In other words, in Europe, the investment will be devoted at accelerating our ability to execute. We plan not to be reliant solely on customers/government grants, but to complement, if needed, what we need to do with other resources. In terms of the numbers, allow us a few more days to be a bit more precise and provide maybe an event where we explain this, but this is pretty much where we plan to invest over the next few years. Obviously, as I anticipated, the U.S. project, especially for the plant, will unfold in the course of the next three years, and that’s when we will incur, obviously, this effort, and that’s pretty much what we can say. In terms of the operating leverage, I would leave the details to Alessandro, but as always, you know, we are now blending two different types of businesses. This is an important point.

The Vega launch business, as you know, has a completely different margin with respect to delivering propulsion either for space or for defense, either in the U.S. or in Europe. What happens is now we will be blending two different types of businesses, a system-level business that is that of Vega, which contains a lot of external suppliers, and therefore the profits we achieve are to be compared with a much larger revenue. They are diluted in a way, right? Whereas when delivering the defense propulsion, we have a much more Avio content, and therefore the margin is higher by definition, right? All in all, this is what we will see over the next few years, considering that we will add more Avio content into the picture. That is the reason why we believe we can accelerate the pace of growth of our profits.

Note that we have pointed you at a larger than 15% EBITDA growth. Again, we’ll be more precise, hopefully, as we come to a specific event on this point. I want to emphasize we are aiming for more than 15% EBITDA growth across the decade. Of course, a decade is a very long period, so you have to understand that you average out lots of things that will have to happen in the course of the next decade. Last on the vertical integration. What do we mean by vertical integration? A bit what you were saying before. As you know, we have a large supplier base. Oftentimes, this supplier base contains strategic technologies. What we need to do is we need to secure certain availability of certain subsistence or certain materials in one way or another.

Really, either we develop the capacity to do it ourselves, or we may opportunistically consider some M&A opportunities if these M&A opportunities are actually available and if these M&A opportunities come at the right price. Otherwise, we might be willing to invest organically in our own capabilities. This funding plan is intended to provide us with the flexibility to act in either way in the interest of everyone else. To you, Alessandro, if you want to.

You have heard explained all the main factors of this. Now that our EBITDA margin is also low because, as we said before, we are recovering from return to flight operations. We are ramping up in Canada, in both Australia and Ariane 6, so the economies of scale are not really exploited today.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, if I may just take a very quick follow-up on M&A. Obviously, I suppose the targets are all like for like without any M&A. It would be eventually an additional.

Giulio Ranzo, CEO, Avio S.p.A.: Sorry, I don’t understand the question.

Alessandro Agosti, CFO, Avio S.p.A.: No, your targets are including M&A for the acquisitions, or I suppose it’s like for like as it is in the current perimeter, the long-term targets.

Giulio Ranzo, CEO, Avio S.p.A.: We will see. As I told you, the objective here, if not to achieve an M&A target, I don’t care. The target is to make sure that we have the right vertical integration to optimize profits and to secure technologies and materials. Now, whether we achieve it via an M&A target or via an organic investment, I don’t know yet. It will also depend on which way will be economic and financially more convenient, so we don’t know upfront. We are open to any situation. We will have to stay open to any situation. Even in the past, you have seen that in certain cases we have made, let’s say, internal organic investment to close some gaps in capabilities and capacities. In other cases, we have had opportunities to make small acquisitions, and we will use the same approach.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, they are not included in the 10% and 15% growth of revenues and EBITDA. This was my very just clarification.

Giulio Ranzo, CEO, Avio S.p.A.: Thank you.

Conference Operator: The next question is from Gabriele Gambarova of Intesa Sanpaolo. Please go ahead.

Unidentified Moderator, Avio S.p.A.: Gabriele, we cannot hear you. I don’t know if you are speaking.

Conference Operator: Mr. Gambarova, please click on the Continue at the top window.

Alessandro Agosti, CFO, Avio S.p.A.: Sorry, I hope you can hear me now.

Unidentified Moderator, Avio S.p.A.: Here we go, Gabriele. Yes.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, thank you. Good morning and thanks for taking my questions. The first one is on the long-term growth targets, plus 10% for revenues. Is it possible to know what cadence for Ariane and Vega does this growth target imply? If possible, do you assume any improvement in the pricing for both, let’s say, the boosters for Ariane and the overall Vega system? This is the first question. The second one is on the U.S. solid rocket motor program. Is it fair to assume that we are targeting, roughly speaking, 10% of the total addressable market, the $1.7 billion you mentioned in the presentation? I have another couple of questions. Bloomberg, a few weeks ago, said that you were considering to launch, if I understood well, satellites from Virginia.

I was just wondering if there is any thought on this front that is launching, let’s say, Vega from other places that are not the French Guiana. The last one is on the 2025 guidance. Your current guidance in terms of revenues, discounts, I mean, implies that the second half of the year you should record negative revenue growth between 6% and 17% when you grew by 30% in the first half. I was wondering how we should deal with this. Do you consider the current guidance as cautious? Thank you.

Giulio Ranzo, CEO, Avio S.p.A.: Gabriele, thank you for your questions. Lots of questions. I will try to share them with Alessandro. Let me start with the first point, the long-term growth targets. Obviously, as I said before, we portray to you an eye-level situation over a very long period of time, over 10 years. The reason why we articulate over 10 years rather than to a shorter timeframe is because we need to take into account that we will have a near-term portion of this decade dedicated to setting up capacity in the U.S., and therefore the growth will not come before we have actually that portion of growth will not come before we have the capacity available. In the meantime, our European business will continue to experience substantial growth, part of which is also in the consensus of analysts already. As you know, this will have an overlay of U.S.

defense activities that we will actually be carrying out in Italy. It’s a mix of different things. To go analytically on these points, we need a dedicated event, which we will make happen within days, maximum weeks, a few weeks. Allow us a little bit of time to be able to explain this more precisely. The situation on Ariane and Vega in terms of a number of flights and pricing. First of all, we had already announced and defined that Ariane and Vega are essentially targeting to reach up to 10 launches a year with Ariane, up to six launches a year with Vega in the relatively near term, I would say the next two to three years, right? We are on a very fast ramp-up.

I know the numbers don’t look like we are changing to triple-digit number of launches per year, but if we do three flights this year, doing six flights means doubling the flight rate and therefore doubling the revenues. That’s quite a target in the near term. What will happen across the decade, we will see. If there is a profitable opportunity to go beyond that, we will be positioned in this way. We will be positioned to capture that, right? I think we are already demonstrating the ability to ramp up. Allow us now some more time to demonstrate we can deliver even more growth, and then we’ll go to the next step. Of course, we will not leave growth opportunity unattended. How can I say? Can we impose a better pricing? I believe we can. I believe we can. I believe we are in the position to do that.

I see oftentimes in the commentary discussions around the cost per kilogram and all that stuff. To me, this is completely irrelevant because in a market that suffers from such a substantial imbalance between supply and demand, price shall not be the name of the game. What is truly important, though, is that we achieve the ability not only to deliver flight rate, but to deliver flexibility around the flight rate, meaning that if a satellite at the last minute is not available and you need to switch it with something else, you are able to do that. If you cannot fly with just one satellite, but you end up flying with five or ten of them, you can flexibly do it. This is what we need to be able to do also to improve the pricing because you can impose more pricing if you deliver a better service.

What we are after is to be able, also through this investment, to deliver a better service, a more flexible and reliable one, not only in terms of flight safety, but also in terms of schedule reliability. If these are the conditions, I think we will have the opportunity to also improve not only the rates, but also the pricing. In terms of the U.S. solid rocket motor growth, what is the market share? I don’t know. We haven’t counted by in decimals what will be the market share that we can capture there. For sure, there will be other tentative new entrants. For sure, there will be reactions from the incumbents, no doubt. I don’t expect this to be a walk in the park, but keep something in mind. There are not very many companies around the world with six decades’ worth of track record in this business.

There are probably three or four, and we are one of them. We have the capabilities to succeed substantially in gaining market share. To be honest with you, I don’t think it will be so much a question of market shares when the market will be experiencing such a growth that will provide opportunities for everybody. Regarding things that Bloomberg came up with, I don’t know whether we are interested in doing U.S. launch or not. If this one day were to provide further opportunities for profitable growth, I think we will be better positioned to capture that via a substantial presence in the U.S. in a very relevant market with good legitimacy and a reputation than if we just were a European player.

I don’t know yet, but I think that our move will provide us with more optionality to also do that should we find opportunity for profitable growth. In terms of the details on the six months, I will leave it to Alessandro. I can take the question on the guidance for revenue. Gabriele, thanks for your question. Yes, we perform very well in this first half on the revenues compared to the first half of 2024, but all in all, in line with our expectations. As you might recall, we have a concentration of our results in the last quarter of the year, as we saw for EBITDA and net cash position quarterly evolution and page 26 of our concentration, and it will be the same for revenue.

For the time being now, we confirm the range of our guidance for revenue between €250 million and €380 million, and we will have more visibility probably at the end of the nine months report.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, got it. Thank you very much.

Conference Operator: The next question is from Anthony Pennell of EDRAM. Please go ahead.

Unidentified Moderator, Avio S.p.A.: Mr. Pennell, we cannot hear you right now.

Conference Operator: Mr. Pennell, please click Continue on the pop-up window.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, can you hear me?

Giulio Ranzo, CEO, Avio S.p.A.: Yes.

Unidentified Moderator, Avio S.p.A.: Yes, loud and clear.

Alessandro Agosti, CFO, Avio S.p.A.: Okay, perfect. Thank you for the insights on the calendar and maybe the capacity of six Vega per year in the coming years. Could you explain to us why it’s such a constraint? Is it because of your capacity of production of P120 or the Vega launcher, or because of the demand of the backlog? What could be a reasonable target well over these six? If you have the demand, what would be your maximum capacity of production of Vega? That’s for the civil question. For the defense question, in the past, as I can remember, you provided the SRM for the Milan missile, the anti-tank Milan missile. You are not today on the Acheron because it’s internalized by MBDA with ROXUL. Why could not MBDA internalize the CAM or the Aster 30 solid rocket motor engine? Why are you only on these two missiles with MBDA?

Giulio Ranzo, CEO, Avio S.p.A.: Thank you for your questions. Very interesting. On the flexibility for Vega launches, I think we clarified that the major constraints to higher flight rates were essentially removed when last year we were authorized to also operate at the Guyana Space Center a pre-integration facility, which will enable us essentially to free the launch pad from integration activities, meaning that while one rocket is being launched, another one is already being prepared for launch, and we are working on the pre-integration facility to be available within the next one to two years. Therefore, that will unlock the ability to. Actually,

Nevio, Conference Host/Moderator, Avio S.p.A.: Go even beyond six flights a year, maybe eight or ten. We will have to see whether there is really demand for these flights. If, as I said before, this is achieving profitable marginal contributions in a way, right? The big step towards unlocking capacity was done with that move. Now, in reality, if we were to grow so much, such as, for example, tripling the activity that we do today, then we need to invest in more tooling, equipment, and things like that, which we will probably have support from the European Space Agency. If we want to go fast, we will also have to use our own resources. This is exactly the reason why, with the capital increase, we want to make a portion available to unlock the ability to accelerate on growth rates in Europe, both in defense and in space.

Now, you had lots of questions on what MBDA is doing. Maybe MBDA can better answer than me on these points. The reason why they keep us as a supplier of Camioar and Astere, I can give you my version of the story, but they would be better positioned to answer then. I believe it’s because we do well and they are satisfied with what we do. In particular, I think there is a long history with Astere that they have been satisfied with. With Camioar, quite frankly, I think we jointly did something smart. We created a very attractive product, a very sophisticated technology by working together with MBDA in partnership. Therefore, it seems to me a very satisfied customer. We will see. I think also that, from their point of view, switching on an existing product from one supplier to another has a cost and requires time.

Unless there is a major reason that, quite frankly, I don’t see, I don’t expect them to be internalizing such activities. I hope I answered your question.

Giulio Ranzo, CEO, Avio S.p.A.: Thank you very much.

Nevio, Conference Host/Moderator, Avio S.p.A.: Last but not least, we also have, with MBDA, additional developments for new products. My question is, why would they be projecting to make new products with us if they weren’t planning to keep us as one of their core suppliers? Of course, they diversify their sources. That has always been the case over the last 35 years. It tells me this is a long-lasting and long-enduring relationship.

Unidentified Moderator, Avio S.p.A.: As a reminder, if you wish to ask a question, please click on the Q&A icon on the left side of your screen and then press continue on the pop-up window or press star one on your telephone. The next question is from Carlo Maritano of Intermonte. Please go ahead.

Conference Operator: Can you hear me?

Nevio, Conference Host/Moderator, Avio S.p.A.: Yes, loud and clear, Carlo.

Conference Operator: Okay. Good morning, everyone. I just have a question on the guidance. I was wondering if your guidance only includes, for the U.S., the two contracts that you already signed, and so further contracts that you can sign in the future are to be considered as an upside to current targets, or if the targets include some way, somewhat something, from also from other clients, given that you indicated more than three clients. Thank you.

Nevio, Conference Host/Moderator, Avio S.p.A.: Apologies, we were on mute, Carlo.

Conference Operator: Okay, I was wondering if I was on.

Giulio Ranzo, CEO, Avio S.p.A.: Thank you.

Nevio, Conference Host/Moderator, Avio S.p.A.: Thank you. Thank you, Carlo, for the question. I think it’s a question of timing here. We do see a lot of commercial momentum, as I said before, even beyond what we had expected. I confirm that. Now, whether we can make this happen, that it falls as an additional order into the end of this fiscal year, considering that we are already in September, I don’t know. I can confirm that there is a lot of commercial momentum above what we had expected.

Conference Operator: Okay, thank you.

Unidentified Moderator, Avio S.p.A.: Once again, if you wish to ask a question, please click on the Q&A icon on the left side of your screen and then click continue on the pop-up window or press star one on your telephone. The next question is from Andrea Bonfà of Banca Akros. Please go ahead.

Alessandro Agosti, CFO, Avio S.p.A.: Hello. Good morning to everybody, and thank you for having me on the technical side. Most of my questions, to be frank, have been answered or partly answered. My follow-up questions are related in particular to the U.S. plant. Is it possible to understand how much of the $400 million will you invest in that U.S. plant? The second one, are you expecting further order backlog before the beginning of construction of this U.S. plant in order to understand which kind of U.S. backlog size are you counting on before investing this kind of money? We are discussing a lot on the U.S. upside potential, but my geopolitical view is that also the European side of defense business should be very important.

If you can comment on that, and if you can maybe give us a little bit of color on the additional $180 million that you gained in July and August, how much is from Europe and how do you see the evolution on that front? If I may, you are rightly highlighting that in your account, Avio U.S. is included in your cost and hence is impacting your profitability. If you can remind us how much you’re spending for Avio U.S. right now, if I’m correct, you mentioned in the past $4 to $5 million. Maybe these are now higher on that. Thank you very much indeed.

Nevio, Conference Host/Moderator, Avio S.p.A.: Thank you, Andrea. Thank you very much for your questions. In terms of what we can say today, the U.S. plant will deserve the majority of our investment resources. We will be more precise as soon as we can, as I said, arrange an event in the next few days, more specifically around the plant. In terms of the order backlog before construction, that’s interesting. Of course, what we will be doing is that we will be crunching work on the programs before the plant is ready. Yes, we need to be able to accumulate order backlog before the plant is ready. Of course, as you may appreciate, in many cases, production readiness will be a condition for the order to become real, right? It will be a little bit of a chicken and egg problem.

At the same time, in order for us to be able, by the end of 2028, to be manufacturing something, we ought to be starting earlier to qualify the production process, part of which we can do in Italy. Therefore, we will know before the plant is ready whether we have orders and how big an order and how big a prospect. We also have to keep in mind that in the U.S., maybe not different from what is the situation in Europe, customers need to receive orders from their customers, meaning that the OEMs need to receive orders from the U.S. government, meaning that the different armed forces. We will have to see how fast a flow down they can arrange, okay? Because on their end, the U.S. Armed Forces need to receive congressional support for the money to be spent on the different programs.

It’s a lengthy process whereby the Congress approves a budget, the armed forces define a certain budget on each system, and that flows through the OEMs, which then flows down to us. Interestingly enough, we also have a relationship directly with one of the armed forces, and that probably makes the flow even faster. The plan is to accumulate order backlog before we start with the plant. In terms of the U.S. defense business growth prospects, a part of it, you actually see it from the announcements we make. As you can see, the orders we are receiving from MBDA are definitely accelerating, right? Therefore, what our expectation for European defense business growth, it’s already happening in the orders. There is a general expectation that the growth would be over and above what we are seeing. This is in the making.

I think discussions are ongoing among governments as to how they will support, financially, further growth in defense procurement. This is not as analytically clear yet, as maybe one would hope. I think it will soon be. Therefore, we will report to you as soon as we see other things. As I said, we see a lot of commercial momentum, a lot of discussions going on, beyond what we delivered as firm order backlog. Now, covering what happened over the last couple of months, out of what we gained as new orders, about €80 million are from Europe. Okay? You can see this has been pretty much what we gained. Now, Avio U.S. costs, yes, you’re right. For the time being, it’s limited to about $4 to $5 million a year for the team we have today.

Obviously, we will have to ramp this up in order to be able to progress quickly with the U.S. plant construction project and, in general, building our capabilities. Again, this will deserve that we provide to you more detailed information in a dedicated event.

Alessandro Agosti, CFO, Avio S.p.A.: Okay. If I may, you mentioned this, let’s say, €150 million to €200 million additional defense order in July and August. I also mentioned before in your speech that more will likely come from Europe. Did I understand correctly?

Nevio, Conference Host/Moderator, Avio S.p.A.: Europe and the U.S. We have both on the U.S. and European front, more stuff in the pipeline.

Alessandro Agosti, CFO, Avio S.p.A.: Thank you very much.

Unidentified Moderator, Avio S.p.A.: Once again, if you wish to ask a question, please click on the Q&A icon on the left side of your screen and then continue on the pop-up window or press star one on your telephone. For any further questions, please click on the Q&A icon on the left side of your screen or star one on your telephone. Gentlemen, there are no more questions registered at this time.

Nevio, Conference Host/Moderator, Avio S.p.A.: Thank you, everyone, for joining. Thank you. Thank you all.

Alessandro Agosti, CFO, Avio S.p.A.: Thank you very much, and look forward to come back to you soon.

Nevio, Conference Host/Moderator, Avio S.p.A.: Thank you. Have a good day. Bye-bye.

Unidentified Moderator, Avio S.p.A.: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your devices. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.