Eutelsat Communications

Hello and welcome to the UtilCell Group second quarter and first half 2024-25 results. My name is Caroline and I'll 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'll 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 zero and you'll be connected to an operator. For today's event, we have Eva Bernicke, the CEO, and Christophe Caudrillier, the CFO. I will now hand over the call to your host, Eva Bernicke, the CEO, to begin today's conference. Thank you.

Good morning. Welcome and thank you for joining us today for UtilSAT's second quarter and first half 25 results presentation. I'm Eva Bernicke. the CEO, and I'm joined by Christophe, our CFO. Today's agenda, as usual, we'll run through a few of the key events of the first half, as well as our operational and financial performance, and we'll take a few next steps for the remainder of our financial year, which ends this summer, and then wrap up around the financial outlook. Start out with the key events of the first half. Key event was of course the signature of the agreement that will set the SpaceRise consortium designing, building and operating the IRIS2 multi-orbit constellation. This will present a big step in UTILSAT's LEO build-out strategy. The signature was on December 16th in Brussels. Following this confirmation of the IRIS2 contract, UTILSAT procured the first batch of 100 LEO satellites that required to ensure continuity enhancement of services, and new technology compatible with the R-squared future assets. In December, we also exercised the put option of the sales and leaseback of passive ground infrastructure, where proceeds are still expected due in first half calendar 26. In terms of financial results, we reported a first half with operating vertical revenues of $600 million, up just shy of 4% at 3.9%, and an adjusted EBITDA margin of 55.2, which is stable year-on-year. This performance enabled us to confirm our full-year revenue and EBITDA margin objectives, albeit with less headroom than in the beginning of the year. Elsewhere, our gross capex is now expected to be lower than initially guided, expected to be between 500 and 600 million euros, thanks to the timing of LEO investments, and reinforced vigilance on GEO expenditures. Finally, on a less positive note, we took a goodwill impairment of $535 million on various GEO assets reflecting a lower expected future cash flows from these assets. I'll come back to this. Quick look at the key numbers. Total revenues at $606. up by almost 6% at 5.9% on a reported basis and a 4.4% on a like-for-like. As you remember, we only integrated one web at the end of Q1 last year. When we look at our operating verticals, revenues for our four operating verticals stood at 600, up by 3.9% or almost 4% on a like-for-like basis. Reported adjusted EBITDA stood at 334.9 at the end of the year 24 compared to 365.6 a year earlier. On a like-for-like basis, adjusted EBITDA was up 4.9%. The adjusted EBITDA margin stood at 55.1% and constant currency versus 63.8 reported and 54.8 on a like-for-like basis. The net debt-to-adjusted EBITDA ratio stood at 3.92 compared to 3.79 at the end of June 24 and 3.79 at December 23. I'll hand over to Christophe to look at a bit more details on the operational and financial performance before I come back to some of the strategic outlook for the year.

Thank you, Eva. Good morning, everyone. As mentioned above, total revenues for the first half, 24-25, stood at €606 million, up by 5.2% on a reported basis and by 4.4% like for like. It reflected a parameter effect of €8 million due to the acquisition of OneWeb, a €2 million negative currency effect, and a €5 million positive swing in other revenues, mainly from hedging. Excluding other revenues, revenues of the four operating verticals were up 3.9% on a like-for-like basis. Let's have a look at the segmental reporting. Video, representing 51% of revenues, stood at €309 million, a decline of 6.4%. Fixed connectivity revenues, representing 20% of the group total, rose 22% to 119 million euros. Government services, 16% of revenues stood at 96 million euros, a rise of 22%. And finally, mobile connectivity revenues, representing 13% of the group total, stood at 75 million euros, a rise of 7%. Let's go into more detail, starting with video. First half revenues were down by 6.4% to €309.2 million, in line with the broader secular market decline. Second quarter revenues stood at €157.4 million, down by 5.6% year-on-year, and up 3.8% on a sequential basis, reflecting the linearization of revenue recognition on certain contracts. This trend does not alter the underlying cadence in video of a mid-single-digit decline, and the second half is expected in line with the trend of the first half. Moving to fixed connectivity. First half revenues stood at 118.9 million euros, up 22% year-on-year, mainly reflecting the continued growth of LEO-enabled connectivity solutions as well as a one-off impact from catch-up revenues from ADO customers. Second quarter revenues stood at 62.2 million euros, up 16% year-on-year, and by 9.9% on a sequential basis, mainly reflecting the above-mentioned one-off impacts. Key contracts signed during the past quarter include a new multi-year agreement with QCOM, to expand LEO satellite services across sub-Saharan Africa, as well as a multi-year, multi-million dollar partnership with NishkomSat to deliver LEO satellite services in Nigeria. Second half revenues will reflect more challenging conditions for geo-enabled consumer broadband in Europe. And notably, by this temporary stop of revenue recognition, from a specific customer on a Connect VHTS satellite. Against this backdrop, Eutelsat is repurposing capacity on Connect VHTS to address a broader range of applications, notably mobile connectivity. First half government services revenues stood at 96.4 million euros, up by 21.9% year on year, reflecting the contribution from LEO services. Second quarter revenues stood at 50 million euros, up by 23.3% year-on-year and by 8% quarter-on-quarter. This vertical is benefiting from improved U.S. DOD renewals in the latest campaigns, as well as increased demand from non-U.S. governments. And finally, mobile connectivity revenues stood at 75.3 million euros for the first half. up 7% year-on-year, mainly reflecting demand for LEO-based solutions, notably for maritime applications. Second quarter revenues stood at 33.3 million euros, down 4.5% year-on-year, and by 20.4% quarter-on-quarter. This decrease reflected lower geo revenues, as well as a one-off contract in Q1 of around 3 million euros, not repeated in Q2 and higher equipment sales in Q1. As a result, the backlog stood at 3.7 billion euros at the end of December 24 versus 3.9 billion a year earlier. This decrease reflects the natural erosion of the backlog, especially in the video segment, partly offset by the growing LEO backlog. Backlog was equivalent to 3.1 times of 2023-2024 revenues, with connectivity representing 56% of the total, and LEO now accounting for 48% of this segment. Let's turn now to the financial performance. Reported adjusted EBITDA stood at €335 million at the end of December 2024, compared with €365.6 million a year earlier, down by 8.4%. On a like-for-like basis, adjusted EBITDA was up 4.9%. The adjusted EBITDA margin stood at 55.1% at constant currency versus 63.8% reported and 54.8% on a like-for-like basis. Rating cost. were 64.3 million higher than last fiscal year, reflecting the impact of the consolidation of OneWeb for six months of the current fiscal year, compared with only three months for fiscal year 23-24. On a pro forma basis, costs were up 3.7%, reflecting on one hand the embarkation of OneWeb at full operational run rate, and on the other, cost control measures implemented since the merger. Group share of net income was a loss of 873.2 million euros versus a loss of 191.3 million euros a year earlier. This reflected higher other operating expenses of 690.8 million euros compared to 183.9 million euros last year. They included a goodwill impairment of 535 million euros in respect of GEO assets, based on the test performed at the end of December 2024. It reflects the cash flow forecast adopted by the group in its latest five-year plan, embarking the lower future cash flows the group expects to be able to generate from its existing GEO assets. Please take account of increased competition in the connectivity market and a greater than expected decline in demand for video services. This is consistent with the impact already experienced by the group in lower video customer renewal rates, and more recently, the transfer of demand from GEO to LEO connectivity services. Then, higher depreciation of 433.7 million euros versus 316.1 million euros a year earlier, reflecting the perimeter effect from OneWeb, as well as higher in-orbit and on-ground depreciation. UTELSAT-3060 satellites and 20 Leo spares entered service during the first half. Net financial results of €99.1 million versus €-60.7 million a year earlier, reflecting higher interest costs partly offset by favorable evolution of foreign exchange gains on losses. Corporate tax expense of 7.6 million euros versus a tax gain of 28.5 million euros a year earlier, implying an effective tax rate of minus 0.9%. It reflects the non-recognition of different tax assets related to losses in France and in the U.K., the net impact of the exemption mechanism for profits allocated to satellites operated outside France, the effect of the tax rates of foreign subsidiaries, and the impact of impairments on the group satellites, particularly those in the SatMex arc. Losses from associates of minus 1 million euros versus minus 23 million euros reflecting the contribution of the state in one way or in the first quarter of fiscal year 2023-2024, now fully consolidated. Moving to CAPEX. Gross CAPEX amounted to 174.8 million euros versus 313.7 million euros last year. This decrease reflects the geo-satellite program delivery on launch last year, as well as lower LEO on ground CAPEX versus last year. First half CAPEX is not representative of expected 2425 outturn, which will embark the 100 LEO satellite patch order. Nevertheless, CAPEX for the full year is now expected in the 500 to 600 million range, lower than previous range of 7 to 800 million euros, reflecting the timing of LEO investments as well as increased vigilance on GEO CAPEX. At the end of December 2024, net debt stood at 2,695.8 million euros, up 151.6 million euros versus end of June 2024. It was mainly due to capex-related movements and higher financial costs, partially offset by net cash flow generated by activities. The result? The net debt to adjusted EBITDA ratio stood at 3.92 times compared to 4.13 times at the end of December 24 and 3.79 times at the end of June 2024. The average cost of debt after hedging stood at 4.84%, with 3.16% in H-1-23-24. The weighted average maturity of the group debt stood at three years, compared to three years at the end of December 23. And drawn credit lines on cash stood at around 1.24 billion euros. Now, back to Eva to comment the outlook and next steps.