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 are 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 top of your keypad to answer your question. If you require assistance at any point, please press star 0 and you will be connected to an operator. And I'd like to turn the call over to your host today, Mr. Christophe Collardier, CFO, to begin today's conference. Please go ahead, sir.

Good afternoon to everyone. Welcome and thank you for joining us today for UTELSAT's third quarter 2024 revenues presentation. I am Christophe Collardier. 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 months 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 geo-capacity 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-36T satellite, assuring service continuity for customers on UTELSAT-36T. 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 Intelsat 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-36T 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 footprints. The satellite also includes additional flexibility on coverage options, enabling to balance the loading between its different missions. The UTELSAT-36T will replace UTELSAT-36P at the 36°E orbital position, where it will operate alongside UTELSAT-36C. There is no further geo-launches planned until calendar 2026. Turning to the OneWeb ground 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, UTELSAT Group signed a major new -million-dollar agreement partnering with UTELSAT on the OneWeb low-Earth orbit constellation. Commencing in mid-2024, the diesel valued at up to $500 million over seven years, with $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-risked 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 of senior notes due 2029 by UTELSAT SA. The new notes bear interest at an annual rate of .75% and are issued at a price of 100% of their par value. The gross proceeds, together with cash on hand, funded the repurchase of 623 million The operation was accompanied by a 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 -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 euros, up by .3% on a -for-like basis. Other revenues were up 0.2 million euros due to a positive 0.7 million variation in hedging revenues versus Q3 last year. Excluding a negative currency impact of 3 million euros based on a -to-dollar rate of 1.09 versus 1.07 last year, revenues of the four operating verticals were up .5% on a -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 one web consolidated since October 1. 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 now. First video. Q3 revenues were down by .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 -on-quarter basis, revenues were down 3.9%, reflecting the non-recurrence of the one-off contract in Q2 for 3 million euros. On the commercial front, UTELSAT 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 UTELSAT 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 or B2O position with Télédiffusion d'Algerie, which increased capacity to consolidate its TV and radio channels on the country's leading video neighbourhoods. IcoMedia Group also took capacity at 7-8 West, as well as 16 East and 13 East, to bring its new eSport TV package, E-Clutch, to screens across Europe, the Middle East and Africa. Moving to government services, third-quarters revenues stood at 43.6 million euros, up by .1% -on-year, boosted by the contribution of the EGNOS G04 contract on Hotbird 13G since June 2023. They also integrated the carry-forward effect of recent U.S. Department of Defense renewals with a renewal rate of more than 80% in fall 2023. -on-quarter, revenues were up by 7.2%. The Spring 2024 renewal campaign with the U.S. 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% -on-year. They reflected the entry into service of the high-throughput satellite UTELSAT-10B on one-way growth. -on-quarter, revenues were up by 11.9%, underpinned by ramp-up on one-way. On the commercial front, UTELSAT extended its partnership with UniversalSATCOM, the Dubai-based satellite communication system integrator, with a new multi-year capacity deal enabling UniversalSATCOM to leverage UTELSAT's geostationary advanced maritime package solution in KU-BAND to extend its coverage in MENA and globally. Elsewhere, Australia's SAT-1 is now using the one-way 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 .2% -on-year, mainly reflecting the entry into service of Connex VHCS as well as a contribution from OneWeb. The third-quarter revenues were up by 11.9%, underpinned by ramp-up on one-way growth. The third-quarter revenues 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 the third-quarter revenues of the third-quarter. The fourth-quarter revenues were up by 3.4 billion euros on 31 March 2024, representing the third-quarter revenues of the third-quarter. 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 2023-24 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 euros after synergies. For the period fiscal year 2025 to fiscal year 2030, cash capex is expected between 600 million euros to 700 million euros 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. 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 one at this time. Our very first question today will be coming from Alexander Pettit, calling from Bernstein. Please go ahead,

sir. Yes, good afternoon, and thank you for taking our questions. I just have a couple. The first one is, can you tell us if you're looking at any potential asset sales or similar transactions that will allow you to deliver a bit more quickly in the context of significantly higher financing costs that you now experience? Obviously, the reason for the question is there were reports in the press regarding a potential sale of ground assets that you may be envisaging. So, just let me know what you say on that. Secondly, if you could comment on the impact of SES's planned takeover of Intel FATs, both from the general market perspective, what you think this will do to the context of pricing in the market and so on, is it good, is it bad? And also, if there are any implications for your significant contract with Intel FATs for one web capacity, do you think that may change in the context of this takeover? And then a third point, very briefly, if you have anything new to share on the subject of Iris Squared, we haven't heard about that that much lately. Thank you very much.

Thank you, Alexander. So, let me try with Johanna to answer to your three questions. First of all, on the global, I would say, any asset sales, I would say that the group is always analyzing all the potential and the evolution of the market. So, I mean, we are, it's something that we are currently looking at, or we're always looking at. To answer more specifically to your question related to the ground infrastructure, I would say that we have been contacted by infrastructure firms who have come to us with the idea to make something similar to what was done in the telecom area with the antennas and with the network.

And

I would say that we believe that they came to see us as we are really well positioned as a starting point for a venture like this. Having the combination of Geo and Leo is obviously a plus. I would say that at this stage, however, we have no further comments on this point. I would say that, again, we are always analyzing all the potential options to partner with the external investors. At this point, the analysis is very preliminary. And anyway, we will come back to the market if there was something to materialize. But at this point, it's very early stage. Moving to your second question related to the announced merge between SES or takeover of Interest by SES and the impact on the market. I would say first of all, it's probably a deal that is going to take quite long considering the two actors. And it's going to take probably many months before it comes to reality. That's the first thing. Second thing, what we can do, what we can say, and I have no specific comments to make, but what I can say, what we can say is that SES will spend probably around $3 billion of cash in this transaction. And clearly, our analysis is that it reduces SES optionality to invest in other projects. And I would say that in the meantime, UTELSAT continues our integration with OneWeb. And we are pursuing our first mover approach in the multi-orbit segments. So thanks to this combination. So we don't really see any significant impact. I would say also that SES-Interest is becoming more and more a US-centric activity. And we are, as UTELSAT, not very much exposed to the US. We are, but not that much. And I would say to end on this question, to add to this question and more related to your question on the impacts on the and I think you are referring to the contracts and the deals that we have signed with InterSAT. I mean, nothing's changed. Again, the combination of SES and InterSAT does not offer the option of low orbits, which is a technical solution which is necessary in the mobility segment. And more specifically, in the aero and maritime, where InterSAT has strong market shares. And the deal with InterSAT has been confirmed because InterSAT, I believe the combination, really do need this capacity. So again, we have a 250 million dollars deal, which is confirmed and an extension, a possible potential extension of another 250 million dollars by the end of the coming years. So I would say it doesn't change a lot, except to what I commented for us. On IRIE Square, the project is still ongoing. I have not much to comment on this specific project. I mean, obviously, we are still very supportive of the IRIE Square project, as it is in line with the LEO development. So we are still very much supportive and we are working on this IRIE Square project, but taking into consideration also the timing for the European community and the very near election. Obviously, it takes a bit of time. So again, the process is still ongoing, but nothing much to add on this point. Joanna, do you want to add something?

No, I think that's very clear. We haven't got an update at the moment. So as soon as we do, you'll be the first to hear it.

Great. Thanks very much.

We now move to Roshan Ranjit of Deutsche Bank. Please go ahead.

Great. Good evening, everyone. Thanks for the questions. I've got two, please, and two quick follow ups on the previous ones. Firstly, on the OneWeb backlog, where we've seen some reports out in one of your big customers is adjusting their demand for some of their projects in the Middle East, I guess it's a neon project. Given their capacity agreement they have with you, does that alter the payment terms or the size or the deal they have with you? Is that a take or pay deal? I think you could say that would be very helpful, please. Secondly, what is the latest on the RFPs for Gen 2? I think they had been issued or the process had been issued at the beginning of the year. So have you got anything back and what is the kind of timing on that? I know previously you were thinking about running it in parallel with the Irish Square project, but given that delay, I guess you're going to be pressing ahead. And just the quick follow ups on the Intorsat capacity agreement. In terms of the logistics of how easy it is to move capacity between LEO and MEO, I guess it's dependent upon the terminals and multi-bound orbits. Are there any other considerations if one wanted to switch between LEO and MEO capacity? And the other follow up is on the infra discussion and you came out with your release last week and Christophe mentioned that you were approached by investors and you made the read across to what we've seen in the tower side. What is the potential to, I guess, have multi-tenants within the ground infrastructure? So could a potential buyer use the ground infrastructure for another provider? Is that easy to do? And what kind of multiples do ground infrastructure go for? Because I guess we haven't really seen a potential deal like this before. Thank you.

OK, thank you, Rochand, for your question. Maybe I will start by the second question and I will, Johanna and I will come back on the first one on the backlog. Really, your question related to the RFPs on the next gen. I mean, the process is still ongoing. We are still in line with a timing which is beginning of the summer, I would say, to finalize the process. And we will come back to the market, obviously, as soon as we have defined more in detail, obviously, the providers, the industry, and also the technical aspects of the next gen. So I have to wait a bit more. Probably, again, we will come back on this around the full year results. Related to coming to your question related to intercepts and the logistics to move the capacity from Mio to Leo. Yeah, obviously, one of the biggest of the biggest impacts are they are not at all the same structure or the infrastructure, meaning obviously the modems and the antennas are really, at least the antennas, are very different. But what we can probably add to this in terms of other considerations is obviously they are not the same. I mean, the coverage is not the same. Today, Mio doesn't have a full coverage. And obviously, for aviation and for maritime, it's very different compared to what Leo can offer at this time. So definitely, this is a big difference. And then I would say they have the same kind of difference between Leo and Mio in terms of capacity and in terms of internal latency. But again, the two biggest considerations to be taken are one, the equipment and then the coverage and the application and mainly related to mobile connectivity. On the question related to the infrastructure and the multi-tenant, I would just quickly answer that it is already the case. And I would say it's more and more the case. We are having other customers in some of our teleports. This is, I would say, mainly true currently for the geo equipment and for the geo facilities. It's not the case currently for Leo. They are really specific to the constellation. Having said that, you have two parts. You have the infrastructure. You have the location of the infrastructure. And clearly, this could be shared with other customers or other users than you tell that group. And then you have already in the geo environment, I mean, multi-customers using the equipment. And back to your question to the backlog on OneWeb. Joana, do you want to answer to this?

Yeah, sure. Just before I do, just on the infrastructure, I think Roshan, I'm not sure if I quite understood your question, but we're talking about financial investors who are infrastructure funds. So we're not talking about selling a portion of the teleports to other operators. I mean, the fact is that we already provide third-party services for other operators, typically smaller operators. But I don't think that we would be looking at changing the governance of the ground infrastructure. So I just wanted to clear that up. And then for the contract, I think you're referring to NEOM and the press articles that have said that they're scaling back their ambitions or their time frame. The answer is it doesn't affect our agreements. As you know, typically, the contracts that we sign on the Leo constellation are take or pay. So what goes into the backlog is a minimum amount that they have committed to. That's a firm commitment. And I'm sure when they signed it, it gave them plenty of leeway to adjust the capacity based on changes to potentially to timeline and scope. So the answer is no, it doesn't affect the backlog.

That's great. Thanks both for the answers.

Thank you for your questions, Mr. Ranchet. We'll now move to Stephane Bayazian of AutoBHF. Please go ahead.

Thank you. I've got one follow up actually regarding one web. Is it possible to have a little bit more color on, let's say, the ramp up of the revenues over the next couple of quarters and whether you have still some big contracts potentially in the pipeline? And the third question is regarding Starlink. Are you increasingly seeing Starlink or its partners bidding in one web segment in the different tenders? Thank you.

Thanks, Stephane. So on the first question, the answer is, as you know, we're not going to report one web separately. Although I think if you look at today's numbers, it's at this stage, it's still fairly easy to back out the one web contribution. But you have our objectives for the current year. You also have longer term CAGR for the next three to four years. But we won't comment specifically on one web. But obviously, as you know, the geostationary side is reasonably mature. So obviously we expect the growth, the revenue growth to come from the Leo side. And in terms of contracts in the pipeline, well, we publish on those fairly frequently. I mean, you know, either when we win a new contract, which goes into the backlog or alternatively, as we've announced in the past couple of months, when we have a market which is open, it means that we can activate contracts which are already in the backlog. But obviously, no comments at this stage on future contracts that we might sign. And then your second question was, sorry.

Oh, it's regarding Starlink that seems to be increasingly interested in the B2B segment. So I was just wondering whether you're asking them more frequently in the bidding?

Well, you know, we know that Starlink is addressing the B2B segment. It's not a surprise. You know, I think we said in the past, you know, number one, we have a certain, I would say, an advantage in the B2B segment, which is that we have a long history of after-sales service. We have a strong ethic or, you know, strong track record and a high level of customer loyalty with regards to our after-sales service. Starlink is starting to make ventures into the B2B space, but obviously their product is still very much geared towards a consumer market. I have no doubt that that will change over the course of time. But I wouldn't say that at the moment it's a major issue for us. And, you know, the other thing, I think, looking at the big picture, we know obviously Starlink is a very big constellation. It will go into other areas for sure. But, you know, we've always said that we can live quite happily with a chunk of the Leo market, knowing that that market is restricted to the number of entrants. So, you know, it's not our ambition to go -to-head with Starlink, but we can live quite happily with maybe a 15 to 20 percent market share of the total Leo market.

Okay, that's fair enough. Thank you.

Thank you very much, sir. Ladies and gentlemen, as a reminder, if you have any questions, please do press star one. Thank you. We'll now move to Bruno Reed Cutting calling from PGIM. Please go ahead.

Yeah. Hi, guys. Thanks. Thanks very much for the presentation. Yeah, could you, I mean, obviously we're on the debt side, so could you just maybe talk about the revenue growth at the UTELSA level? That would just be useful to understand. And then similarly, just related to the launches and the launch schedule you have coming up on the geo side of the business, could you just kind of talk about what you have there in 26 and beyond and I guess what those projects, what the kind of capex envelope is for those specific projects?

So, yeah, thanks for your question, Bruno. First of all, on the revenue of the geo side, I mean, even though we do not communicate specifically on geo and Leo, as you, as we have communicated, as we've already mentioned, this year is the first year where UTELSA, I mean, I would say the legacy UTELSA is back to growth. And this is really related to the addition of the high throughput satellites and the additional capacity that we have added in the last years, meaning, I mean, we have launched four satellites in the same year last year, well, in 22, sorry, and these were the two Hotbirds and also KVHTS and UTELSA 10B. And those last two satellites are bringing a significant additional capacity in connectivity business mainly. And that's where we were able to return to growth and we are on track on this. And this brings me to move to your second question related to the next launches. As we said, I mean, we have realized a big portion of the investment with those satellites that have been launched in the past at least one or two years. And the UTELSA 36D that we mentioned today is a replacement of the current satellite, which is at the end of his life. Beyond that, in our plan, there is only one satellite for which we have commitment, which is connected, I would say more focused connectivity satellite, a FlexSat, which is going to be launched in 2026. And I would say we have no further commitment for new satellites at the moment. Obviously, we will replace the current fleet of satellites as they are ending their life and according also to the markets and to the customer needs and to the continuity of service.

OK, so thanks for helping and just for that one that you have commitments for, what is the CAPEX envelope for that?

Well, we don't generally give specifics, but the average CAPEX for a geostationary satellite program is probably in the region of 250 to 350 million euros. And just as a reminder, so we pay the CAPEX in installments upfront. So by the time that that satellite is launched, it will have been fully paid. So it's the cost of that satellite is embarked in the guidance that we give for CAPEX for the current and the coming years.

OK, that's great. Thank you very much.

Thank you very much for your question, sir. We'll now move to Terence Tsui calling from Morgan Stanley. Please go ahead.

Yeah, thank you. Good evening, everyone. Just a couple of quick follow ups from my end. On the OneWeb revenues, are you in a position to maybe disclose a bit more the split between hardware sales and just regular subscription service revenues? Because I know obviously it was a big talking point in the trading update you announced in January earlier in the year. And then secondly, on Iris Squared, just been reading the press reports and various comments from a number of ministers. Is it fair to say that the cost of the project has probably been underestimated by the European authorities? And from your perspective, do you still have good conviction that they are going to really proceed with building a Leo network from scratch? Thank you.

Thanks, Terence. Tough question. Well, on the OneWeb revenues, there's not a tough one, but on the OneWeb revenues, we don't split the breakdown between hardware revenues and what you call subscriptions. Having said that, clearly, I mean, you front load your equipment. So a significant portion, I would say, of the OneWeb sales for the past month and for the coming months are obviously linked to hardware sales. But at the same time, the service revenue, what we call service revenue, is ramping up. So obviously, the proportion of each one are going to move in favor of a higher level of service revenues compared to hardware. But at the start and with the ramp up of the sales, a significant part of the sales are related to hardware. On the Iowee Square, I would say, I mean, you're probably right in what you mean in terms of the cost assumptions taken by the EU for a constellation. And clearly, we have of the consortium as

long

discussions with the members of the European community related to the overall cost. But at this point, we are still confident that the project is still moving. It's something that seems to be really needed at the EU level, at least with the team who is working on the subject. And as I said before, I mean, we cannot comment much more on this. There's no more to comment. And we obviously, we will come back to you on who will be the first one to know as soon as the project moves.

All right. Thank you.

Thank you very much, sir. We'll now go back to Alexander Pettit of Bernstein. Please go ahead.

Yes, I am just a quick follow up on the SCS Intel side deal. From your perspective, would you in principle have any objections from the perspective of, I don't know, dominant position, anything like that to this deal? Or do you view this as going to show for you and you're quite friendly to it?

No, I don't think Alexander, we would have any objection to this deal. Anyway, we don't. No.

Great. Thanks very much.

Thank you very much, sir. As we do not appear to have any further audio questions, I turn the call back over to Mr. Crouderedie for any additional or closure remarks. Thank you.

Well, with that, so if you, there's no more question. I wish you a very pleasant evening and we will talk to you again at the occasion of the full year financial results for your test group. Thank you very much to everybody and have a good night.

Thank you. Ladies and gentlemen, that concludes today's presentation. We thank you for your attendance. You may now disconnect. Have a good day and goodbye.