Eutelsat Communications

Good day and welcome to the UDLSAT Communications full year 2022-23 results presentation conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Eva Bernicke. Please go ahead, madam. Thank you.

Welcome. Good morning. Good morning. And thank you for joining us today for UTILSAT's full year 22-23 results presentation. I'm Eva Wernicke, CEO, and I joined today's call by our CFO, Christophe Couturier. Let's start by taking a look at the highlights of the year. This year's operating verticals revenues were at the upper end of our expected range. This performance was namely based on sustained momentum in mobility connectivity. We posted a double-digit growth over the full year. We delivered a very solid financial performance, including an industry-leading adjusted EBITDA margin of 73%. Adjusted discretionary free cash flow of 518 million, comfortably within our expected range of an annual average over two years of 420 million at the exchange rate euro-dollar of one. 382 million proceeds related to phase 2 of the C-band, and that's in dollars, transitioned recognized in very late June 23 after the completion certification. On the operational front, this financial year was also marked by a successful entry into service of three satellites. We launched four, but three of those four have already gone into service. The two hot birds, 13F and 13G, is ensuring service continuity, our flagship 13 East video position. But the hot bird, 13G, is also hosting an incremental ECNAS payload, which is also part of the strong performance on cache this year. Users at 10B, which we just announced had gone into service, carries incremental 33 gigabytes of capacity, addressing especially demand in mobile connectivity, but also sees and enjoys firm pre-commitments from both Intelsat and Panasonic. And today I'm happy to announce that we just signed a four-year multi-million deal with Marlink for specifically capacity on the E10B, illustrating the very strong commercial traction addressing the booming mobility connectivity needs. On the back of this, we confirm all our objectives with sustained cash generation and return to growth next year on a UTILSAT standalone basis. This leaves UTILSAT with strong foundations to ensure the successful merger with OneWeb, where the EGM is expected to approve the transaction in late September. Looking at a few of our key figures, Christophe will come back to the details, but let me just take you through the highlights. Revenues for our five operating verticals stood at 1,136,000,000 on a reported basis, and 1,157,000 at the exchange rate of one euro to a dollar, on which our original objectives were based. This represents a 4.8% decline on a like-for-like basis, but it's comfortably within the midpoint our expected range between 1,135,000,000 and 1,165,000,000. Also, we delivered an industry-leading profitability with an adjusted EBITDA of 73%. The decrease year-on-year is illustrative of the changing revenue mix between video broadcasting and mobility connectivity. Cash capex stood around 271 million, which is broadly stable year-over-year, despite the launch of four new satellites. Discretionary free cash flow stood at 462 million euros on a reported basis. On an adjusted basis, as our financial objectives, which is at the 1 euro to US dollar rate, it stood at 518 million, well above the objective of the annual average of two years of 420 million. The net debt to EBITDA ratio stood at 335 in June, broadly stable versus last year. We remain comfortable compared to our medium-term objective of three times, as we shortly will receive the 382 million US dollar pre-tax in respect to the second phase of the C-band proceeds. Now let's have a look at full-year revenues. Total revenues for the year stood at 1,131,000,000 euros, down 1.8 on a reported basis. Other revenues, as a reminder, revenues other than those generated in the commercialization of satellite capacity were down 8 million, including a 3 million negative variation in hedging revenues. Excluding a positive currency effect of 33 million based on a euro to dollar rate of 104 versus 114 last year, revenues of the five operating verticals were down by the before mentioned 4.8 percent on a like-for-like basis. As you'll have noted, and we wanted to do a little bit of explaining of this, we've slightly adapted the way we report our operating verticals. The definition of operating verticals remains the same, but our new framework is altered from five segments to four within the operating verticals. Video will be regrouping broadcasting and professional video that used to be two different segments. Fixed connectivity will encompass data and fixed broadband. Mobile connectivity and government services will remain as they were before. Proforma quarterly data, 21-22 and 22-23, is provided in the appendixes of the press release. Let's look at the different segments in the revenue in more detail. Video is 62% of the group total, recorded revenues of $705 million, down 8.3% versus last year. Government services, around 12% of group revenues were down 7.2%, with revenues 143. Mobile connectivity, a 10% of total, saw revenues of 110 up by almost 27%, 26.8% to be precise. Fixed connectivity, 16% of revenues stood at 178, an organic decrease of 2.3%. Going to the operational performance Video, the full-year revenues we just mentioned were down 8.3% to 207 million. This reflected the full-year effect of the non-renewal of DigiTurk, which we previously mentioned, lower revenues in Europe, the effect of the sanctions against certain Russian and Iranian channels, which mainly impacted the second half, and professional video revenues, which account for about 10% of this vertical, also decreased. reflecting structural headwinds as well as some seasonality on key events. On the commercial front, and more positively, UTILSAT was selected by Orbi Elevate for the distribution of the first mainstream English language direct-to-home services for the U.S., leveraging the coverage of UTILSAT West 117 over the U.S. UTILSAT also extended its partnerships with DO, the Emirates Integrated Telecommunications Company, to upgrade It's tied to home services across the Middle East and North Africa. Government services revenues start at 143 million, down 7.2 year-on-year. Fourth quarter revenues stood at 45 million, up by almost 26%, and 45% quarter-on-quarter. This increase was mainly due to a one-off contract of 14 million with German space agency DLR, whereby Hartberg 13F provided a service from April on the 0.5 east orbital position. Excluding this impact, fourth quarter revenue declined with 14%, a level consistent with the trend we also saw in the third quarter, albeit presenting a slightly improved trend versus first half, thanks to superior renewal rate in the spring of U.S. DOD campaign, which is above 70%. We saw only 65% in the fall 22 campaign. Mobile connectivity revenues stood at $110 million, up 26.8% year-on-year, reflecting a very positive momentum, especially in maritime. Fourth quarter revenues stood at $27 million, up 20.7% year-on-year, and 2.9% quarter-on-quarter, reflecting the positive impact of the commercialization in the first half of the third beam on the UTILSAT quantum for maritime mobility customer. Fixed connectivity stood at 178 million, down 2.3% year-on-year. In broadband, 40% of this application revenues were broadly stable on a comparison basis, including the contribution from the wholesale agreements with Orange Tim and more recently Hispasat and Swisscom as well, but to a lesser extent the growth of African operations. In fixed data, which is 60% of this application, we saw improved volume trends partly offset by negative impact on the ongoing competitive pressure on prices. Fourth quarter revenues stood at $41 million. On a like-for-like basis, they were down by 60% year-on-year and by 6.9% quarter-on-quarter, reflecting tougher comparison basis, including a positive one-off of 2.5 in the fourth quarter of last year. Including this one-off, they were broadly stable on a sequential basis. Turning to backlog and fill rate, the backlog stood at $3.4 billion at end June versus $4 billion a year earlier. reflecting the natural erosion and the absence of major broadcast renewal in this quarter. And it's partly compensated by additional mobility contracts. The backlog was equivalent to three times 21-22 revenues, and video represented 59% of the total versus 64 a year ago. The backlog profile is progressively reflecting the rebalancing of our operations towards connectivity with also shorter contracts. Moreover, the backlog does not yet include managed service, with a new definition to provide it next fiscal year. The number of operational transporters as in June 23 stood at 1,351, broadly stable year-on-year compared to last year, while the entry into service a new regular capacity compensating for the stable orbit life of a few satellites over the last 12 months. The number of utilized transponders stood at 953, down by 43 units year-on-year, but up 37 units compared to March, the latter reflecting seasonality of certain maritime contracts, especially in Europe. Keep in mind that this picture does not include yet the HTS capacity of some of our satellites, such as Eutelsat Connect. As a result, the fill rate stood at 70.8% compared to 73.2 a year earlier, and 67.8 in December. Let's now turn to the more detailed financial results and I'll hand over to Christophe.

Thanks, Eva. Good morning, everybody. Happy to be here with you. I will start with the adjusted EBITDA, which stood at 825 million euros at the end of June 2023, compared to 862 million euros last year, down by 4%. The adjusted EBITDA margin stood at 72.9% at constant currency. That is to say, 73% on a reported basis versus 74.8% in fiscal year 2022. This is on the back of lower revenues, mainly in the video business. Operating costs were 16 million euros higher than last year, reflecting, first, increased staff and technical costs due to a changing revenue mix and, to a lower extent, inflation. the cost incurred by transactions with Russia, and third, exchange rate negative impact. This adjusted EBITDA margin is reflective of the progressive rebalancing of our business towards connectivity applications. Turning to the P&L, group share of net income stood at €315 million versus €231 million a year earlier, up by 36% and representing a margin of 28%. This reflected on the positive side, lower depreciation of minus 455 million versus minus 482 million euros in year 22, which was due to lower in-orbit and on-ground depreciation. Two satellites, Hotbird 13F and Hotbird 13G, entered into service, respectively, on April 4th and May 30th, 2023. Other operating income of 203 million euros compared to an income of 45 million euros last year and includes 382 million dollars related to phase two of CBAN proceeds. As a reminder, last year's other operating income including 125 million dollars of phase one of CBAN proceeds. On the dignity side, Net financial results of minus 91 million euros versus minus 65 million euros a year earlier, reflecting an unfavorable evolution of foreign exchange gains and losses as well as higher interest rates. Higher tax at minus 67 million euros versus minus 49 million euros a year earlier, reflecting notably The 30% tax rate applied to the above-mentioned SBAN proceeds. And negative income from associates of minus 87 million euros, reflecting the full-year contribution of the Stake-in-One Web, which last year was only from September 2021 onwards. Moving to cash. Net cash flow from operating activities amounted to 735 million euros, 66 million euros, lower than a year earlier due to lower adjusted EBITDA and the first installment of $100 million of the take-all pay agreement signed with OneWeb, partially compensated by lower working capital requirement needs, namely thanks to a prepayment in respect of the EGNOS contract of 85 million euros and strong cash collection. Cash capex amounted to 271 million euros a level broadly stable versus 280 million euros last year. Interest and other fees paid net of interest received amounted to 95 million euros versus 78 million euros last year. It notably reflected interest from the credit facility drawn down for the financing of satellite programs. Discretionary free cash flow amounted to 462 million euros on a reported basis. up 19 million euros. Excludes the first installment of $100 million of the take-all pay agreement signed with OneWeb. Adjusted discretionary free cash flow as per the financial outlook definition and at a euro-dollar rate of 1, 2.518 million euros down 3 million euros or 1%, but well above our objective of an average of 420 million euros per year at a euro-dollar rate of one for fiscal year 23 and fiscal year 24. Turning to the next slide, at the end of June 2023, net debt ended at 2,766 million euros, down 49 million euros versus end of June 2022. It reflected higher discretionary free cash flow of 462 million euros generated in fiscal year 23, the reduced dividend payment of 81 million euros following the payment of part of the dividend in shares under the script option, the outflow related to an inorganic investment of 143 million euros, mainly for one web, and other items which contributed to the increase in net debt for a net impact of 190 million euros. This reflects mostly the use of a debt-related finance lease for the financing of satellite programs, which amounted to 200 million euros. As a result, the net debt to EBITDA ratio stood at 3.35 times, compared to 3.27 times at the end of June 2022. We remain comfortable compared to our medium-term objective of around three times as we expect to receive the cash of phase two of CBAN proceeds of $382 million pre-tax. The average cost of debt after hedging stood at 2.96% versus 2.55% in fiscal year 22 in a higher interest rate environment. The weighted average debt maturity stood at 3.6 years compared to 4.3 years at the end of June 2022. And last but not least, Equity remains strong with undrawn credit lines and cash of around 1.5 billion euros. This is it for the financial results. I now hand it over to Eva for the outlook.