Eutelsat Communications

Hello and welcome to the UTOSAT full year 2023-2024 results. My name is Caroline and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only mode. However, you will have an opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your questions. If you require assistance at any point, please press star 0 and you will be connected to an operator. I will now hand over the call to your host, Eva Bernicke, the CEO, to begin today's conference. Thank you.

Good morning, everybody. Welcome and thank you for joining us to UTILSAT's full year results. My name is Eva Bernicke. I'm the CEO of UTILSAT. I'm joined by Christophe Couturier, our CFO. And on bonus, you get our IR team with Hugo and Joanna also in the room. We are today announcing our results and I will run through the key events of the past year, both our operational and financial performance. Christophe will help me with some of the details there. And then we'll come back to the outlook and objectives for 2024-25. Turning first to the highlights of the past year. Our financial year, as you know, ends on end of June. so our financial year 23-24 were in line, or even a bit better, than objectives in terms of revenue and profitability. The key event that was, of course, the closing of the UTILSAT OneWeb combination at the end of September, creating the first true geo-LEO integrated player. Our connectivity pivot is now well and truly established with a growth boosted by the LEO ramp-up, as well as additional incremental geo-capacity. Robust commercial traction, notably with major multi-application contracts in the OneWeb constellation. I can mention IntelSAT as an example, but multiple others as well. Some of the operational success, which include entry into service of both E10B and ConnectVHTS, as well as the launch of UTILSAT-3060, completes the space segment of the OneWeb constellation at the mid-year. And elsewhere, also for our balance sheet, we achieved a successful refinancing of the November 25 bond early on that was already completed at the end of March this year. A quick look at some of the key numbers which might be of interest to some of you. Our total revenues stood at 1,213,000,000, up by 7.2% on a reported basis. and on a 5.6% on a like-for-like basis. As you know, we guide on our four operating verticals, and revenues of the four operating verticals stood at $1,209,000,000, up by 5.9% on a like-for-like basis. Revenues compared to our financial objectives, so performer and including one web for 12 months rather than nine months, and a constant exchange rate were at $1,268,000, so well within our objective range, which was $1,250,000 to $1,300,000. Adjusted EBITDA ended up at $719 million, down 12.9%. As our financial objectives, it stood at $698 million, so nicely above our objectives of $650 to $680. Cash capex ended up at 463 million, so below the expected range of 6 to 650. The net debt adjusted to EBITDA stood at 3.79 times compared to 3.35 times at the end of June 23, and 416 at the half year, December 23. Turning to a bit of the commercial momentum that we've seen, we continue to see a really strong commercial traction in especially our connectivity business. This has been a year with very few renewals in the video, so a lot of the commercial traction has been driven by LEO services, but also some strong wins in our geo-connectivity capacity, in particular on our Connect capacity over Africa. Some of the main contracts I'd like to highlight. are, of course, the large Intelsat seven-year deal that provides Intelsat with LEO services across some of their key verticals signed in March this year, but also Viasat for maritime broadband services and JASAT with a multi-gigabit contract for high-speed internet connectivity across African and Middle Eastern nations, essentially on our Connect satellites, which is now going to be turned to be used extensively over Africa and the Middle East. CVN Warner Brothers in Poland, renewing and expanding capacity on HOTBIRD. That's a broadcasting contract in this otherwise slightly smaller renewal year. And NEC with a multi-million dollar deal for connectivity capacity, especially on low Earth orbit over Africa. But also some of our distributors have signed contracts with especially targeting connected the unconnected with liquid for communities and businesses in Africa. Can it come for connectivity to the public safety sector across the U.S.? QCon also services especially for South Africa. And of course, a strong partnership with Hanwha distributing LEO services to South Korea to connect the unconnected. As a result of a lot of this strong commercial momentum, our backlog is now just short of $4 billion at $3.9 billion at June 24, coming up 15% over the $3.4 billion a year earlier. It reflected the contribution, of course, of OneWeb, which more than offset the natural erosion of the broadcasting video segment where we saw an absence of major renewals this year. The backlog is about 3.5 times of 2022-2023 revenues, And connectivity is now more than half of our backlog at 56% of the total, up at 40% year over year. So we really show the momentum and the commercial momentum behind our connectivity pivot. A quick view on our coverage as per day and what we expect to see at the end of the summer. We're on track. We're now 37 gateways open, coming up another three against the 34 in March. and coverage is further extended, especially in the Middle East and some of East Asia, as well as Africa and most of India. Now, I'll hand it over to Christophe for a look at some of the operational and financial performance of the year, and I'll be back with the outlook to wrap it up.

Thank you, Eva. Good morning, everyone. Before we start, a quick reminder on how the numbers are presented. Reported figures include one web, 6 October 1, 2023, and are compared to UTELSAT's reported fiscal year 2022-2023 performance on a standalone basis. All commentary regarding revenues is on a like-for-like basis, that is to say at constant currency and parameter. As mentioned above, Total revenues for fiscal year 23-24 stood at 1,213 million euros, up by 7.2% on a reported basis and by 5.6% like for like. Revenues of our four operating verticals, that is to say excluding other revenues, stood at 1,209 million euros. They were up by 5.9% on a like for like basis excluding a negative currency impact of 20 million euros. Operating verticals revenues as per financial objectives, i.e. pro forma including one web for 12 months and at a euro-dollar rate of 1, stood at 1,268 million euros. Let's now have a look at the segmental reporting. Video, representing 54% of revenues, stood at 651 million euros, a decline of 6.8%. Fixed connectivity revenues, representing 19% of the group total, rose 29% to 234 million euros. Government services, 14% of revenues, stood at 165 million euros, a rise of 5%. And mobile connectivity revenues, representing 13% of the group total, stood at 159 million euros, a rise of almost 50%. Other revenues amounted to 4 million euros versus minus 5 million euros a year earlier. They included a reduced 3 million euros negative impact from hedging operations compared with 15 million euros last year. Moving to the operating verticals, fiscal year 23-24 video revenues were down by 6.8% to 651 million euros, reflecting a secular market decline in this application. In the first half, this trend was accentuated by the effect of sanctions against Russian and Iranian channels, as well as the early non-renewal of a capacity contract with DigiTurk from mid-November 2022. Both these effects washed out in the second half. On the commercial front, recent highlights include the renewal and extension of capacity by Poland's TVN Warner Bros. Discovery at UtahSat's Hot Bird neighborhood, as well as the consolidation by United Media Group of its entire DTH broadcasting activities at Eutelsat 13°E and 16°E hotspots. Professional video revenues, which account for less than 10% of the video vertical, decreased, reflecting structural headwinds as well as the seasonality of some events. They will be mildly boosted by the Olympic Games in Q1 Fiscal Year 25. Fourth quarter revenues stood at €159 million, down by 6.2% year-on-year, and broadly stable quarter-on-quarter. As mentioned above, fixed connectivity revenues were undumped by the entry into service of Connect VHTS in October 2023, and the progressive transfer of UTELSAT Connect capacity to the buoyant African markets. Capacity on UTSAT-Connect is being contracted by YASAT's YACLIC to drive growth across its satellite broadband footprint in Africa. Elsewhere, KU-band capacity on UTSAT-70B was selected by Intersat to extend its Pan-African satellite services to enterprise and retail customers, complementing existing KA-band agreement on the UTSAT-Connect satellite. Revenues were also boosted by a significant uplift in OneWeb-LEO with the activation on progressive ramp-up of commercial agreements in line with the progressive availability of the ground network. The OneWeb contribution was especially visible in the fourth quarter where revenues stood at 82 million euros, up by 73.5% year-on-year and by 42.6% quarter-on-quarter. Moving to government services, revenues stood at €165 million, up 5% year-on-year. They reflected the contribution of the EGNOS G04 contract on Hotbird 13G from June 2023, the contribution from OneWeb's LEO connectivity solutions, and the more favorable outcomes of the past two USDOD renewal campaigns. This rise was partly offset by a tougher basis of comparison with last year due to the one-off contract of 14 million euros with German Space Agency, DLR, in the fourth quarter where Eutelsat Hotbird 13.5 provided a service from April 2023 at the 0.5 degree east orbital position prior to its commissioning at 13 degree east. Fourth quarter revenues stood at 47 million euros, down by 14.5% year-on-year, reflecting the above-mentioned contract. Excluding this impact, fourth quarter revenues would have risen by 15.6% year-on-year. For mobile connectivity, fiscal year 2023-2024 revenues stood at 159 million euros, up 49.3% year-on-year. reflecting the entry into service of the high throughput satellite UTELSAT-10B and the contribution from OneWeb. Fourth quarter revenues stood at 49 million euros, up 80.4% year on year, and by 25.6% quarter on quarter, mainly driven by geo-performances. Let's now turn to the financial performance. Adjusted EBITDA stood at 718.9 million euros at the end of June 2024, compared with 825.5 million euros a year earlier, down by 12.9%. It reflected higher operating costs due to the impact of the consolidation of OneWeb. The rising cost was nevertheless contained at plus 8.9%, reflecting cost control measures. Adjusted EBITDA as per financial objective, i.e. pro forma, including one web for 12 months and at a euro-dollar rate of 1, stood at 697.5 million euros, above our objective of a range between 650 and 680 million euros. On a pro forma basis, the adjusted EBITDA margin stood at 54.8%, and at 59.3% on a reported basis versus 73% a year earlier. Moving to net income, group share of net income stood at a negative 310 million euros compared to a positive 315 million euros a year earlier. This reflected first other operating costs of 208 million euros compared to income of 204 million euros last year, mainly due to last year's 352 million euros proceeds related to the Phase II of the U.S. C-band sale, as well as the fair value adjustment of shares owned by UTestat before the combination. Second, depreciation of 702 million euros versus 456 million euros a year earlier reflecting the perimeter effect from OneWeb, as well as in-orbit and on-ground depreciation. Eutelsat 10B and Connect VHCS entered into service between July 2023 and June 2024. Third, a net financial result of minus 124 million euros versus minus 91 million euros a year earlier, reflecting higher interest costs partly offset by the favorable evolution of foreign exchange gains on losses. Fourth, a corporate income tax gain of 28 million euros versus a charge of 67 million euros a year earlier, mainly driven by the non-recognition of the deferred tax assets on WAMWES losses, partly offset by the specific French tax regime relative to satellite operator. In Fiscal Year 2022-2023, the tax charge reflected the 30% tax rate applied to the CBAN proceeds. And finally, losses from associates of €23 million versus €87 million last year, reflecting the contribution of the minority stake in OneWeb in the first quarter versus a full 12 months in fiscal year 2022-2023. Let's move to cash now. Cash capex amounted to 463.2 million euros versus 270.5 million last year, reflecting the consolidation of OneWeb. It is below our previous estimates, reflecting LEO constellation phasing on other capex delays, notably the Flexat America satellite, which is delayed to calendar 2028 due to manufacturer timing issues. Fiscal Year 23-24 gross capex, that is to say excluding the financing of all or part of certain satellite programs under export credit agreements or through other bank facilities, stood at 517.1 million euros. From Fiscal Year 24-25 onwards, gross capex will be adopted as our core indicator. By excluding financing-related flows, the Group seeks to provide a clearer and more accurate representation of its direct capital expenditures. Moving to debts. At the end of June 2024, net debt stood at 2,544.4 million euros, down by 221.3 million versus end of June 2023. It notably reflected proceeds from asset disposal, namely the net proceeds from the second tranche of the C-band sale and the disposal of the shares in the Airbus OneWeb Satellites joint venture owned by OneWeb. It was partially offset by CAPEX-related movements as well as OneWeb entry into parameters. As a result, the net debt to adjusted EBITDA ratio stood at 3.79 times compared to 3.35 times at the end of June 2023 and 4.16 times at the end of December 2023. The average cost of debt after hedging stood at 4.87%, 2.96% in fiscal year 2022-2023. The increase reflected notably the impact of issuance of the 2029 high yield bond. The weighted average maturity of the group's debt amounted to 3.5 years compared to 3.6 years at the end of June 2023. Equity remained strong with undrawn credit lines and cash around 1.39 billion euros. With that, I hand it back to Eva to comment the outlook.