Eutelsat Communications

Hello and welcome to the UTELSAT's third quarter and nine months 2023-24 revenues. My name is George. I'll be your coordinator for today's event. Please note, this conference is being recorded and for the duration of the call, your lines will be in listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to answer your question. If we require assistance at any point, please press star zero and you will be connected to an operator. And I'd like to turn the call over to your host today, Mr. Christophe Coulodier, CFO, to begin today's conference. Please go ahead, sir.

Good afternoon to everyone. Welcome and thank you for joining us today for UTELSAT third quarter 2024 revenues presentation. I am Christophe Coulodier. I'm the group chief financial officer, and I'm joined by Joanna Darlington, Head of Communication and Investor Relations. On today's agenda, we will cover first the highlights of the third quarter, then Q3 performance, and finally, we will have a look at the outlook and financial objectives. Let's start with the highlights of the past quarter. Third quarter on nine-month revenues were in line with expectations. Video was in line with overall market trend of mid-single-digit decline. Now, the base effect of the non-renewal of the digital contract and Russian sanctions was washed through as of the third quarter. Connectivity applications continue to see double-digit growth, up 22% in government services, plus 48% in mobile connectivity, and plus 24% in fixed connectivity, driven by incremental geocapacity and LEO. With all this, we confirm all our full year 2023-2024 financial objectives. On the operational front, we saw the successful launch of the UTELSAT-3060 satellite, assuring service continuity for customers on UTADSAT 36B. And in LEO, the rollout of the OneWeb ground network remains on track. On the commercial front, we secured a major $500 million deal with INTADSAT for capacity on the OneWeb LEO constellation. And finally, on the financial front, we completed the successful refinancing of November 2025 bond. On geo-operational front, we successfully launched UTELSAT 3060 satellite on March 30th, with an entry into service expected during the second half of 2024 calendar. Embarking 70 physical key U-band transponders, This satellite will assure service continuity with optimized performance for customers in video over its footprint. The satellite also includes additional flexibility and coverage options, enabling to balance the loading between its different missions. UTELSAT-36D will replace UTELSAT-36B at the 36 degree east orbital position, where it will operate alongside UTELSAT-36C. There is no further geo-launches planned until calendar 2026. Turning to the one-webground deployment, with 34 gateways now open currently, we are now halfway on track to our target of 38 gateways by mid 2024. On the regulatory front, we are also on track in terms of landing rights and operating permits, with the exception of India. In March, Eutelsat Group signed a major new multi-year, multi-million dollar agreement partnering with Intelsat on the OneWeb Low Earth Orbit Constellation. Commencing in mid-2024, the deal is valued at up to $500 million over seven years, with a firm commitment of $250 million including the $45 million deal signed in March 2023, with options of a further $250 million by the end of the period. This expanded partnership significantly de-risks investment in OneWeb, as well as highlighting the necessity in today's world for major satellite operators to be able to offer multi-orbit solutions to their customers. On the financing front, UTELSAT completed the refinancing of November 2025 bond at the end of March with a successful offering of 600 million euros of senior notes due 2029 by UTELSAT-SA. The new notes bear interest at an annual rate of 9.75% and are issued at a price of 100% of their par value. The gross profits together with cash on hand funded the repurchase of 623 million euros worth of the 800 million euros 2% bonds issued due to 2025. The operation was accompanied by new revolving credit facility agreement of 450 million euros. The graph on the left shows the updated debt maturity profile. There are no significant repayments now due until 2027 and 2028. Let's turn now to the Q3 performance by application. Let's have a look at the Q3 revenues. As a reminder, All commentary is on a like-for-like basis, i.e., at constant currency and parameter. Reported indicators include one web since October 1, 2023, and are compared to UTELSAT's Q3 2022-2023 performance on a standalone basis. Total revenues for the third quarter stood at €300.8 million. up by 8.3% on a like-for-like basis. Other revenues were up 0.2 million euros due to a positive 0.7 million euro variation in hedging revenues versus Q3 last year. Excluding a negative currency impact of 3 million euros based on a euro to dollar rate of 1.09 versus 1.07 last year, revenues of the four operating verticals, meaning excluding other revenues, were up 8.5% on a like-for-like basis. Let's look at revenues in more detail. Video revenues, representing 53% of revenues, stood at 160.2 million euros in the third quarter, down 4.9%. The other three verticals include a contribution from OneWeb consolidated since 1st of October. Government services, 15% of revenues, stood at 43.6 million euros, up 22.1%. Mobile connectivity, 13% of revenues stood at 39.2 million euros, up 48%. And fixed connectivity, now 90% of revenues stood at 57.4 million euros, up 24.2%. Other revenues amounted to 0.5 million euros versus 0.4 million euros a year earlier. They included a negative minus 1.1 million euro impact from hedging operations compared to a negative impact of minus 1.8 million euros last year. Let's look by vertical map. First video. Q3 revenues were down by 4.9% to 160 million euros. in line with the broader market trend following watch-through of the base effect of last year's non-renewal of the digital contract and Russian sanctions. On a quarter-on-quarter basis, revenues were down 3.9%, reflecting the non-recurrence of the one-off contract in Q2 for €3 million. On the commercial front, Eutelsat secured several new contracts in emerging broadcast regions, highlighting the ongoing relevance of satellite in these markets, where sustained demand is partially mitigating the decline in Europe. They included notably New Business on UTSAT 117 West A with Mexico's Star TV for the deployment of Starflix, its new streaming service. Instituto Nacional de Radio y Televisión del Perú which signed a multi-year capacity agreement for large-scale content distribution to homes and IP devices across the country. We also inked a new business at 7.8 West orbital position with Télé Diffusion d'Algérie, which increased capacity to consolidate its TV and radio channels on the country's leading video neighborhoods. ICO Media Group also took capacity at 7.8 West as well as 16 East and 13 East to bring its new eSport TV package, eClutch, to screens across Europe, the Middle East and Africa. Moving to government services. Third quarter revenues stood at 43.6 million euros, up by 22.1% year-on-year, boosted by the contribution of the EGNOS G04 contract on HB13G since June 2023. They also integrate the carry-forward effect of recent US Department of Defense renewals, with a renewal rate of more than 80% in fall 2023. Quarter on quarter, revenues were up by 7.2%. The spring 2024 renewal campaign with the US Department of Defense confirmed the improved trend observed in fall 2023, with a renewal rate once again above 80%. Third quarter mobile connectivity revenues stood at 39.2 million euros. up 48% year-on-year. They reflected the entry into service of the high-throughput satellite UTELSAT-10B on one-web growth. Quarter on quarter, revenues were up by plus 11.9%, underpinned by ramp-up on one-web. On the commercial front, UTELSAT extended its partnership with Universals.com, the Dubai-based satellite communication system integrator with a new multi-year capacity deal enabling Universat.com to leverage UTELSAT's geostationary advanced maritime package solution in KU bands to extend its coverage in MENA and globally. Elsewhere, Australia's Sat1 is now using the OneWeb LEO constellation for the first time activation of land-based service across Australia's remote northern and southern regions, maritime services in Australian waters, and commercial service in New Zealand. Moving to fixed connectivity, third quarter revenues stood at 57.4 million euros, up 24.2% year-on-year, mainly reflecting the entry into service of Connex VHCS as well as a contribution from OneWeb. Quarter on quarter, revenues were up by 6.7%. On the commercial front, OneWeb is gaining traction with the activation of contracts where the service is now fully operational, notably in South Africa, where QCon, a leading satellite engineering enterprise, is leveraging the Constellation to deliver digital banking services in the region. And NEC XON, a leading African integrator of ICT solutions and part of Japan's NEC Group, has signed a multi-year, multi-million dollar deal for connectivity for enterprise customers in remote areas, especially in agriculture, mining, and oil and gas. Let's look at the backlog now. It stood at 3.9 billion euros on 31 March 2024 versus 3.5 billion euros a year earlier, and is stable versus end of December 2023, representing 3.4 years of revenues. It reflected natural erosion in the video segment in the absence of major renewals this quarter, offset by the contribution of OneWeb. Video accounted for 44% versus 61% a year ago, with connectivity therefore representing over half of the backlog. Let's now turn to the outlook. On the back of our nine-month performance, We confirm our objectives for the full year 2023-2024 of operating verticals revenues of between 1.25 to 1.3 billion euros and adjusted EBITDA in a range of 650 to 680 million euros. Cash capex for fiscal year 2024 remains expected in a range between €600 million and €650 million after synergies. For the period fiscal year 2025 to fiscal year 2030, cash capex is expected between €600 million to €700 million on average per annum. We also continue to target leverage of around three times in the medium term. With that, thank you very much for your attention, and Joanna and I are now ready to take all your questions.

Thank you very much, sir. Ladies and gentlemen, as a reminder, if you have any questions, do please press star 1 at this time. Our very first question today will be coming from Alexander Pettit, calling from Bernstein. Please go ahead, sir.