Thales S.A.

Yes. Hello.

Good morning. Welcome and thank you for joining us for the presentation of Thales' nine months 2020 order intake and sales.

I am Bertrand Delcaire, the Head of Investor Relations at Thales. With me today is Pascal Bouchiat the CFO of Thales.

This presentation is audio webcast live on our website at thalesgroup.com where the slides and press release are also available for download. A replay of the call will be available in a few hours.

With that I would like to turn over the call to Pascal Bouchiat.

Thank you, Bertrand. And good morning everyone.

So, before moving on to the numbers and as usual I wanted to highlight a few key messages. I'm now on slide two.

First, as we explained during the H1 results presentation in July, after the disruptions that we faced in Q2, we targeted returning to close to 100% internal productivity over H2. Thanks to the mobilizations of the teams, observations recovered strongly in Q3 which enabled us to post much improved sales growth.

Organic sales growth actually turned positive if we exclude the aeronautics global business unit. Second, the past few months have provided us further confirmation that the dynamics on our defense markets remain solid.

The French government presented its 2021 budget a few weeks ago. In spite of the COVID-19 crisis, the defense budget continues to track the trajectory that was approved in 2018 as part of what is called the LPM, the Military Programming Law.

The budget will increase by €1.7 billion in 2021, i.e. around plus 4.5%.

I could also mention Australia, our second largest defense market which reaffirmed its commitment to a 7% year growth in defense budget. Greece which recently announced its intent to buy Rafale aircrafts.

These continued dynamics drive a significant pipeline of orders including several that we expect to book in Q4. Finally, we recently announced a strength of ESA contracts in space exploration which are coming on top of the successes in Earth observation that were mentioned during our H1 results.

In particular as shown on the slide Thales Alenia Space will be a major supplier to Artemis NASA's lunar mission. It will design the two European modules of the space station that will orbit around the moon for a total value of more than €600 million that will be booked progressively in the next years to come.

These awards demonstrate the robust dynamics we are seeing in the institutional space market. Turning now to slide three which summarizes our key figures for the third quarter and the first nine months of the year.

Figures for the first nine months are, of course, marked by the disruptions we faced in Q2. More interesting are the Q3 figures which show a strong recovery.

Organically order intake was only down 8% and sales down 4% compared to last year. As I will show in a minute, excluding aeronautics, both KPIs actually turned positive in Q3.

So, I'm now on slide four with our order intake dynamics and key commercial successes for the first nine months of 2020. The nine months order intake was marked by the impact of the COVID-19 crisis on civil aeronautics demand; and by the phasing of large orders which you see on the right.

However, looking specifically at Q3, order intake declined by only 8% and excluding aeronautics, we actually achieved a low single-digit growth. Year-to-date we booked six orders of more than €100 million including two in Q3; the third tranche of Scorpion, the French military vehicles program; and also a support and services contract for the French army.

Going forward we see a significant pipeline of large orders unfolded in Q4 starting with MKS 180, this German frigate program. And surprisingly the decline in small orders below €10 million primarily reflects the impact of COVID-19 on demand in civil aeronautics and also biometric passports.

Moving now to slide 5 and looking at the sales. The chart on the right shows the different drivers behind reported and organic growth.

The currency effect was a small negative over 9 months at 0.8% of sale. It was concentrated in Q3, where it represented almost 2% of sales.

It was particularly strong at DIS, which was impacted by the devaluation of several emerging market currencies. The significant scope effect €697 million was of course primarily due to the Gemalto Q1 2019 sales.

Turning to organic growth. The breakdown per quarter shows a major swing.

After the 20% decline we faced in Q2 sales achieved a strong recovery minus 4.3% in Q3. On the one hand as expected, we were still impacted by the major drop of demand in civil aeronautics around 45% in Q3 driving a 30% decline for the whole aeronautic global business unit.

On the other hand, thanks to the mobilization of all teams we achieved a strong recovery of sales in the other businesses which actually managed to grow by 1.5% in the quarter. Now looking briefly at each segment one by one.

I'm now on slide 6. So in Aerospace orders were down 13% compared with the first 9 months of 2019 at €2.3 billion.

This is reflecting two opposite trends: the major negative impacts of COVID-19 on our civil aero businesses; and the recovery of Space orders. As I mentioned earlier, we have seen a lot of activity in the institutional space market.

In Q3, we booked the first phase of two of the five Copernicus missions we're involved in and we expect the three others by the end of the year. On the other hand, the commercial telecom satellite market remained soft.

Excluding C-band-related orders only 4 geostationary satellites were ordered year-to-date worldwide. Sales improved materially in Q3 compared to Q2, minus 18% versus minus 38%.

With an organic decline of around 45%, civil aero sales improved slightly, but remained heavily depressed. Considering the travel restrictions that were imposed again at the end of the summer, we naturally remain cautious on the level of civil aero demand in the coming months.

The bulk of the recovery came from the strong productivity improvements in the rest of the segments in military avionics, in microwave tubes in Space, which all together delivered low single-digit growth in Q3. Now moving on to slide 7 with Transport.

Transport order intake saw a pickup in Q3, up 19% organically. They were down only 6% over the first 9 months of the year.

Mainline orders recovered in Q3, but we continued to see delays in urban rails contract awards. Sales in Transport were down by 12.3% organically.

As mentioned previously, part of this negative growth was expected because of the phasing-down of work on major urban rail projects, which have been driving very high comps since the end of 2018. This was aggravated by the COVID-19 operational disruptions, especially in regards totaling on-site installation and testing activities and to a lower extent by delays in urban rail contract awards.

Turning to slide 8 looking at the Defence & Security segment. Defence & Security orders amounted to €3.9 billion, down 27% year-on-year.

This was primarily due to the volatility of large contracts above €100 million. We booked 5, 6 large orders this year against 9 last year in the context of delays at finalizing contracts.

As I mentioned earlier, we have a significant pipeline of orders being finalized and we expect to catch up in Q4 and to deliver once again, a full year book-to-bill, clearly above one in this segment. Sales were organically down by 3.3% and reached €5.47 billion.

Thanks to the mobilizations of all the teams many businesses recovered strongly from the operation disruptions they faced in Q2 including surface radars, military communications and combat aircraft. Now moving on to Slide 9 with Digital Identity and Security, the last segment.

I don't comment order intake, which as you know is not meaningful for this segment. Pro forma over nine months, sales were down only 2%, overall a solid performance considering the impact of the COVID-19 crisis on the biometrics and IoT markets.

Sequentially, sales growth improved slightly in Q3 compared to Q2. As expected, smart card sales moved into negative territory in Q3 after an "above long-term trend" performance in H1.

Biometrics and IoT remain affected by the health crisis. With respect to Q4, we expect smart card sales to face high comps and biometrics and IoT to remain a bit weak because of the sanitary crisis.

So all of that brings me to the last slide, Slide 10 with our 2020 financial objectives. As you understood Q3 order intake is in line with our expectations.

And once again is we have a solid pipeline of orders for Q4, which allows us to confirm our full year order intake target and mainly a book-to-bill ratio above one. Thanks to the mobilization of the team sales growth recovered strongly in Q3 more than 15 points above Q2.

This quite solid performance increases our confidence in the group's ability to meet the full year objective €16.5 billion to €17.2 billion. We confirm as well our 2020 EBIT target €1.3 billion to €1.4 billion.

We are making good progress on our global adaptation plan, which enable us to confirm the €750 million target for 2020 cost-saving actions. And then our negotiations on the mix of structural cost measures are ongoing, so it's too early to update the restructuring cost assumptions embedded in this guidance €130 million.

And of course, we remain extremely focused on cash management in this quite unprecedented crisis. So thank you very much.

Many thanks for your attentions and I will now be pleased to take your questions. I guess the line is or should be open for Q&A now.

Hi, good morning. So first question for Transport.

In the press release you talked about order weakness from delayed signatures notably caused by financial difficulties of some operators. We didn't see that language from last quarter's release, so have you observed anything incrementally worse over the last three months as it pertains to the demand impacts on the customer's ability to sign contracts?

And my second question would be on the book-to-bill for Aerospace coming below 70%. Is that really driven by the civil aeronautics?

We saw the slight uptick in revenue in the quarter but did the orders improve sequentially for civil aeronautics? Thank you.

Okay, thank you very much. So your first question on Transport.

We will need to consider on one hand the mainline segments, where we see good dynamics there with in particular, I mean, some significant orders that we booked in Q3. And overall, we remain quite positive on these mainline segments, as opposed to the -- more the urban rail segments where we see here more weakness.

And as we mentioned, I guess, it was as we released in our H1 figures, yes, through some operators facing quite a steep drop in term of passenger traffic and putting them in of course a more difficult situation when it comes to awarding a new contract. And basically this is what we kept seeing in Q3.

So I wouldn't mention that I mean the situation has worsened in Q3 for the urban rail signaling business. I will say it is pretty much in line with what we have seen so far since the beginning of the pandemic.

On Aerospace, yes, I mean it's quite obvious that I mean the negative book-to-bill that we've seen is really I will say driven by this quite low level of demand in the civil aeronautics business. So yes in this business in particular, we are today operating at a level of book-to-bill, which is below one.

It is going to be the case for the full year, yes. Now I mean the more we'll move on the more we'll see, I guess, order intake and level of sales in civil aeronautics converging because as you know this is a business where I mean the cycle is quite short.

But yes, it's true that today the civil aeronautic business is driving a book-to-bill, which is significantly below one.

All right. Thank you.

Thank you.

Yes. Good morning, Pascal, Bertrand.

Thanks for taking my question. I was wondering in civil aeronautics if you could break out the impact and the trends that you saw in Q3 into IFE aftermarket and the linefit avionics work that you do?

And potentially any color of how you see those trends progressing into Q4? And then Pascal, I know, you mentioned in the call in your prepared remarks that orders are not super important for Gemalto, but they were very weak in Q3.

Could you help us to understand why? And you highlight that there's going to be tough comps for that business moving into Q4.

Could you help us understand what you expect from an organic perspective in Q4 on revenues? Thank you.

Okay. Good morning, Ben.

So on civil aero Q3 IFE linefit. So overall, I mean, we mentioned that on our civil aero business we have seen a drop in sales in Q3 which is -- I will say is pretty much in line with what we have seen in Q2.

So let's consider overall a drop which is around 45% against Q3 of last year. And overall, it's I will say it's pretty much I mean what we see across our global civil aero business.

You mentioned IFE linefit. So overall it's pretty much what we see.

So I mean a drop in linefit and drop in aftermarket, which overall looks pretty much -- are pretty much similar. Now it's true that we might see in some months a bit of improvement, but then I mean next month is showing a new drop.

So we might see and this is what we have seen in Q3 a level of sales for each particular month which might be a big different, but overall when you consider I mean a three months period basically Q3 overall this is what we have seen pretty much across all our civil aero business and no specific points to report to you showing a dynamic that would be quite different from aftermarket versus linefit or IFE versus more the cockpit avionics business. On DIS and Gemalto, I mean -- so what do we see?

And how could we anticipate Q4? You probably have in mind that in our DIS business in particular in the first half of 2020, we benefited from quite a strong level of demand in our smart card businesses by the way both on the banking and also on the telco segments.

And we knew that we would see a progressive reduction in demand in particular in the banking segment after this quite strong level of demand in H1 and in particular in the U.S.; and basically this is what happened in Q3. And we think that it will continue in Q4 where this banking segment has to be compared to quite a strong Q4 2019.

So first point. And now overall I mean the level of demand as we see still remains overall quite solid.

It's probably more Q4 2019 that was exceptionally high in term of level of demand. I mentioned in my presentation, the situation in particular on biometrics and to a more global standpoint the overall secured documents segments where it's true that we'll keep seeing today and because of the COVID-19 crisis, a clear reduction in demand as compared to the same period of last year.

And it is quite simple. I mean, the less people travel, the less we see a passport renewal in particular.

Our cybersecurity is doing quite well in DIS with in particular I mean Q3, which has been quite strong. Now we need to see how Q4 will look like.

I mean, it's a short-time-cycle business but overall the level of demand is there. And last point is IoT.

Well, overall I mean we keep seeing quite a soft level of demand in this business, a bit of recovery in the automotive market during Q3. However, we'll remain quite cautious on this market even for the automotive segment where we might see up and down throughout I mean the next few months.

So overall I mean this is the picture I can share with you on our DIS business, which overall has shown quite a strong level of resistance against the -- I mean since the beginning of the crisis.

Okay, great. Thank you.

Thank you.

Yes, good morning Pascal and Bertrand. Thanks for taking my question.

I would ask actually three. The first one on the free cash flow for 2020, has anything changed compared to what you were seeing in -- at the end of June?

And is for instance the strong order intake that you expect in Q4 having an impact there? Second on currency, if currencies stay where they are at the moment what should we expect in Q4 something similar to Q3 and in particular in DIS?

And third, how do you see Space looking in 2021 with all the order intake that you've had so far this year? Thank you.

Okay. Good morning, Olivier.

So first question about cash flow. We'll see today I mean a level of cash flow, which is quite I will say firm against last year.

And despite, of course, I mean this drop in overall I mean level of EBIT since beginning of 2020 against the same period of last year we'll see our cash flow today holding quite firmly. Now I mean probably a bit too early and I don't want to change the guidance that we provided to you on cash flow for the full year 2020.

All what I discussed with you end of July remain fully valid. Now of course it is also true and you mentioned the point that Q4 is traditionally quite a strong quarter in term of cash flow generation.

And it's true that, of course, we are expecting a level of down payments associated with various large orders that should kick in, in Q4. All of that being in line with I mean the guidance that we shared with you, for the full year cash flow generation.

Now in terms of currency, it's true that I mean, as we all know we have seen, I mean some devaluations in some emerging countries' currencies. I mean the same for the U.S.

dollars. And it is in particular on the DIS business.

So yes, we are still expecting in Q4 at our DIS business -- I will say the negative impact coming from currencies, are probably not as negative, as it was in Q3. Space and I guess, your question was more about our view on 2021 level of sales for our Space business.

At this point, it's really I mean too -- it's really too early -- no. So let's move on step-by-step.

We have seen I mean order intake in Space in Q3 showing quite a strong progress, as compared to Q3 of last year. But Q3 last year was also quite a modest level of comparison.

So let's complete 2020, before I mean discussing how we should see -- we should be seeing 2021, in term of level of revenues for this business. Overall, I mean -- and the message is still pretty much the same for this business.

We see a level of demand in the institutional markets, whether it's observation. And it was the case in particular with the Copernicus project.

Or whether it is exploration, with what I mentioned about the -- this new lunar mission managed by the European Space Agency -- we will see I mean the institutional market of space, being quite strong. On the other side, as I mentioned in my press we'll keep seeing a level of demand in the civil telco business, which remain quite low, as we speak today.

Thank you.

Thank you.

Hi. Pascal, I wondered if I could ask about the confidence in the defense orders coming through in the fourth quarter please, and if they don't come through, whether it really matters from a kind of medium-term perspective if they slip.

And then, also could you please give a little bit of color about the, restructuring progress on the kind of negotiations that you're having there with the unions? And then the final thing cheeky one, is would you be prepared to give any kind of initial view on 2021, whether you expect organic revenues to be up next year, for example.

Thank you.

Okay. Good morning, Jeremy.

So on defense order, I guess my tone was quite positive, when commenting our Q3 order intake for defense. And it's true that end-of-September, level of order intake for defense is quite below what it was a year ago.

Now I made it quite clear, that we are expecting Q4 to be quite strong in this business. And I'm quite confident, on that.

As I mentioned, we are finalizing various large-size contracts. And I mean MKS 180 is a good example.

And this is really I mean a jumbo contract for Thales. Now of course, as always, I mean, we might see here and there potentially, I mean some kind of cutoff.

Or I mean, we might see in a worst-case scenario, some order intake in defense moving from Q4 to Q1. So of course in term of overall level of revenue for 2021, 2022, it will not change the overall picture of defense.

But of course we might see, I mean, some delays there, which I don't see today. So I guess I'm quite positive, on our level of Q4 order intake for our Defence & Security business.

Second point, restructuring. So we are today negotiating with our trade unions.

And we expect I mean, finalizing with them a global group agreement, in the next few weeks. I mean, I think of course, I mean by the end of 2020.

So I mean discussion are pretty positive, I mean, between us and the trade unions. At this point and coming back to our guidance our 2020 guidance, it's probably an opportunity for me to remind everybody that our guidance our €1.3 billion €1.4 billion EBIT guidance is based on the level of restructure, which is around €130 million.

You probably have in mind that end of July I mentioned that €130 million will be probably more a floor than a ceiling on restructuring. This is my view today.

This is still my view today. So we might end up at a level of restructuring charges that could be a bit above this level, but it might be a few or several times.

At this point, it's probably still a bit uncertain as we have not finalized, I mean, those negotiations. And of course, I mean, if it makes sense for Thales to go a bit further in term of restructure of course we'll proceed, I mean in order to prepare for the future.

Your last questioned was about –

2021-2020.

2021 in term of organic growth...

Yes that was it. Thank you.

Yes. At this point, and of course, I will be at this point a bit cautious.

I mean, I got this question from Olivier on Space and globally for Thales. Of course, I mean, we are expecting our level of revenues in 2021 to be above what it will be in 2020, of course by definition with in particular, I mean, the disruption that we faced in Q2.

And now at this point, I guess it's – and sorry for that, but at this point it's really too early to be more precise on that. So let's complete our 2020, I mean, fiscal year delivering on those guidance also seeing how we see I mean the COVID situation evolving.

I guess that all of us we see that the overall sanitary context is deteriorating. And I'm not talking about Thales.

I'm talking about the overall COVID-19, I mean, situation in particular in Europe with more and more countries putting in place curfews. But also even some other countries putting in place new lockdowns.

I mean the case of Ireland for instance. So, of course, we are a bit cautious; and a bit difficult to anticipate, how I mean, the sanitary situations will look like in three months in six months in nine months.

And of course, I mean, all of that of course we think could be quite important in term – in particular, in term of level of demand. Now – and I guess, this is quite a positive message.

You'll probably remember that one way we did our H1 figures, we made it clear that the disruptions that we have seen in term of production in Q2 was for most part of them over. We learned how to operate despite all the sanitary constraints linked to the COVID.

And I guess that you have seen that our Q3 figures demonstrate what we shared with you end of July, our ability to restore a level of production that is almost a normative level of productions, now all of that with a sanitary situations, which is overall under control. And this is where of course, we need to remain cautious as we'll see day-after-day, a global sanitary situation in various countries to deteriorate.

So I'm of course, a bit cautious, but I'm confident, of course, I'm quite confident on all the figures that we shared with you in term of 2020 guidance.

Thank you very much Pascal.

Thank you, Jeremy.

Yeah. Good morning, Pascal and good morning, Bertrand.

Thanks for taking my question. I have four, so I'll try to make keep them short.

But the first one is on the behavior of your JVs. You indicated quite a drag from them in H1 Naval Group your JV with Diehl U.S.

businesses. Can you tell us how they behaved in Q3?

And especially, if you could expand a bit on Naval Group I think they just announced a new transformation plan. So how you see the business evolving?

That would be useful. Second question is on your cash flow trajectory to refine a bit on making – to make sure I understand your answer to Olivier.

You mentioned firm free cash flow – or firm cash flow versus last year, so I suspect you're talking about like a free cash flow. We were at €1.37 billion in 2019.

Consensus is at €0.5 billion for 2020 but – so you're saying free cash flow should be closer to the one from 2019. And does the difference like fully come from new order intake down payments coming from H2?

Or is there any other part in the free cash flow bridge that has moved? Third question is on defense spending or the defense spending environment.

You talked about support from mature countries. You mentioned Australia, France and solid defense spending momentum.

Can you tell us what you see today more in emerging markets Southeast Asia, Middle East? What is the feeling you get on the persistence of solid defense spending there?

And I'll stop this here, because that's already a lot. Thanks.

Okay. Good morning, Tristan.

So first on JV, I mean, when going through our JV, I mean, some of them are in particular in the field of civil aeronautics. And we have in particular, I mean, two JV of this kind.

One are located in Germany, which is Diehl Aerospace, which is clearly impacted by the severe drop in demands. And what we see overall at Thales in term of level of demands, we see I mean pretty much a pretty similar scenario in term of demand for Diehl Aerospace.

Of course, I mean, the contribution of this JV will be, as you can imagine, quite low as compared to what it was a year ago. We also have a JV of this kind in the aeronautics business in U.S together with L-3 Comm.

And here again, I mean, we'll see quite a strong drop in term of demand. So, of course, I mean, this JV line will be quite strongly impacted by in particular, I mean, those two JVs.

And Naval Group that you probably have in mind that has seen quite major disruptions in term of production in Q2, we'll see, I mean, the situation improving at Naval Group. Now, it takes a bit of time, so at this point a bit cautious, I mean, on H2.

Of course, I mean, H2 will see quite a significant improvement as compared to Q2. However, I don't expect at this point Naval Group to come back on H2 to the level of contributions that they delivered in H2 2019.

Cash flow. I mean, thank you very much for your question, because my answer was not precise enough.

So thank you to give me the opportunity to come back on this point. What I wanted to mean was that, because of these quite strong drops in term of EBIT as we have seen end of H1 as compared to end of H1 in 2019 and also considering the quite strong drop in term of EBIT for the full year 2020 as compared to 2019, I mean, without a specific cash optimization program, we might see I mean quite difficult situations in term of cash flow.

And my message was not this one. My message was that, I see a level of cash flow, as I speak today, which is quite well under control.

It was by that case, I mean, the same message that I convey end of H1. I see today a level of cash flow, which is well under control and in particular, by all our cash optimizations actions that we have put in place, including also I mean containment in term of capital expenditure and many other actions.

All of that allowing me to confirm what we shared with you in term of 2020 guidance for the full year. And I'll remind you what I said end of July, starting with, I will say, a standard or normative 95% conversions ratio from net income to cash flow.

I mentioned that in 2020 we will see, obviously, the material reversal on down payments on in particular large defense contracts and I mentioned a level of down payments reversals of around €300 million. So all of that are driving a level of consensus, which, in my recollection, is something around €500 million.

And I'm quite happy with this level of consensus, really, I mean, reflecting what I've just mentioned, which is first ability to keep a conversions ratio which is rather good, but also still having in mind the fact in 2020 we'll have quite a material reversal of down payments on several large export defense projects. Defense spending support, yes.

I commented, yes, in particular France. I mean Germany is also quite positive as you know.

I mentioned also Australia where I mean the 7%, I will say average growth is -- has been confirmed. So all of that is positive.

Now your question about emerging markets. We'll see today in emerging markets quite a strong level of commercial activity with a number of requests for proposal, a number of discussions.

Now what I see in emerging markets is this a process to make these final decisions in term of awarding and making decisions to award contracts taking even more time than it was in the past. And I mean, Middle East is a good example of that.

So hence the fact that of course, I need to remain cautious. I mean we are pursuing various opportunities in those countries, but this is where I mean we might have a bit of uncertainty in term of the exact timing for booking those contracts.

So strong level of commercial activity. Now we need to move from that to getting and being able to book contracts.

And then that's it I guess, Tristan.

Yes. That was it.

Thank you so much Pascal for all your answers.

Thank you.

Thank you. And good morning, everyone.

Two questions if I may. My first one would be just regarding transport and the slowdown that you're flagging regarding urban rail and if that could have an impact regarding your profitability progression.

So what's the impact on the mix? And also if you need to do further restructuring in that division and that could be one reason why you also think you could have higher restructuring charge; and the impact on cash if you have deferred payments from some of these customers?

And then my second question would be regarding the cards in Gemalto. So regarding the Q3 performance and if you could just help us understand how much were the cards down in the quarter and if that was relatively slightly less worse than what you expected.

And then where do you see the biggest drop in Q4? I think you suggested potentially in banking cards, but why would it all of a sudden happen in Q4?

Thank you.

Okay. Thank you.

And good morning, Celine. So on transport, yes I mentioned and confirm I mean this slowdown in term of level of demand from the urban segment and as I mentioned, I mean driven by -- I mean the drop in passenger traffic.

Now I mean will this affect the mid-term profitability? My answer is quite simple.

I mean if the COVID generates in the midterms, I mean less demands in urban I mean we'll adjust our costs accordingly. And overall last year, we are more on -- I will say the midterms project in term of execution.

I mean, I don't see today the need to drive -- I will say a material restructuring on this front. And what I mentioned in term of 2020 restructuring level is not at all associated with this softness in term of demand for the urban transport business.

And I don't see a significant impact on cash coming from this softness in transport. Your second question was on DIS and in particular on smart cards.

So overall, we see we have seen -- so I mentioned that in the first half 2020 both banking and SIM cards managed to get quite a good level of activity as compared to the same period of 2019. And we have seen I mean even throughout we -- I mean the COVID-19 crisis, we have seen in H1 level of demand in particular by the way in the banking area being quite strong.

And probably some of our clients are probably considering that there might be some production disruptions; and probably some of our clients asking for some kind of, I will say, additional stocks, precautionary stocks. Q3, I mean, overall in the smart card business a drop, which is close to 5% against Q3 2019.

So, I mean how do we see Q4? I mean we know that Q4 last year was quite strong, so we'll see in smart cards, I mean, a level of drop in volume of around 5%.

I mean I guess it's probably a good rule of thumbs. I cannot be more precise on this front, but probably -- I mean this is probably a good proxy.

But once again, on the basis of quite a strong Q4 2019 level of sales in those two sub-segments.

Thank you, Pascal. And if I'm not mistaking, I think you had said maybe a 10% to 15% drop in H2, so that will be quite encouraging.

Thank you.

Thank you very much.

Okay. If -- I understand that there is no further questions, so thank you very much for your participation to this call.

Maybe, I mean, opportunity for me to remind you that even if all investor events are now virtual, which is not that helpful, of course, I mean this situation must not prevent you from engaging with us. I would like to tell you that together with Patrice Caine, I will participate in a few conferences and events in the coming weeks.

And of course in the meantime, the IR team, Bertrand is here. Of course, I mean they are at your disposal if you have any further questions.

So thank you very much. See you and have a good day.

Bye-bye.