Eutelsat Communications

Welcome to the UTELSNA third quarter and nine months 2024 and 25 revenues call. My name is Alan and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration your lines will be on listen only. However, you will have the opportunity to ask questions at the end. This can be done by pressing star 1 on your telephone keypad. If you require assistance at any time, please press star zero and you'll be connected to an operator. I'll now hand you over to your host, Christophe Caudelier, to begin today's conference. Thank you.

Hello, everyone. Welcome and thank you for joining us today for UTELSAT's third quarter 24-25 revenues presentation. I'm Christophe Caudelier, Group CFO, and I'm joined today by Joanna Darlington, Chief Communications and Investor Relations Officer. On today's agenda, we will cover recent highlights, Q3 performance, and outlook and financial objectives. Let's start with the highlights. Third quarter revenues of the four operating verticals, i.e. excluding other revenues, stood at €300.6 million. They were down 2.2% on a like-for-like basis. of the four operating verticals for the first nine months were up 1.8% on a like-for-like basis. Connectivity applications continue to see double-digit growth on the back of LEO-enabled solutions. With all this, we confirm all our full-year 24-25 financial objectives. Let's turn specifically to the Q3 performance. First, as a reminder, all commentary is on a like-for-like basis, i.e. at constant currency and parameter. Total revenues for the third quarter stood at 300 million euros, down 1.9% on a like-for-like basis. They reflected, first, a 7 million euro positive currency effect, and second, a 1 million euro negative swing in other revenues, mainly from hedging. Excluding other revenues, revenues of the four operating verticals were down 2.2% on a like-for-like basis. Let's look at revenues in more detail. Video representing 50% of revenues stood at €152 million, a decline of 6.4%. Fixed connectivity revenues representing 20% of the group total, rose 1% to €60 million. Government services, 17% of revenues, stood at €50 million, a rise of 10.2%. Mobile connectivity revenues, representing 13% of the group total, stood at €40 million, down 2.7%. I will come back to this. Let's start with video. Third quarter video revenues amounted to €152 million, down 6.4% year-on-year, are in line with the broader market trend. On a quarter-quarter basis, revenues were down 4.8%, reflecting the linearization of revenue recognition on certain contracts in Q2. On the commercial front, UTALSAT renewed a video capacity agreement with its long-standing partner, ATSS, in the MENA region. UTALSAT also expanded its services for professional video, committing significant new resources at the flagship Hotbird constellation at 13°E. Elsewhere, UTALSAT renewed its partnership with UAE-based content distribution specialist for satellite contribution services across the Middle East and North Africa, extending capacity leased on UTELSAT-21B and UTELSAT-70B. Let's move and have a word on Russia. UTELSAT is implementing EU Regulation 269-2014 concerning the denial of resources to Russian entities which, since March 2025, is being applied to selected media groups by the French regulator ARCOM. Following the recent removal of two channels, STS and Canal 5, belonging to JSC National Media Group, UTELSAT is in the process of removing further channels controlled by this company, as well as those controlled by VJTRK from UTELSAT capacity. At this stage, the impact on the group's revenue of the removal of these channels is being estimated at around 16 million euros on an annualized basis and a similar amount at the EBITDA level prior to any mitigation measures. Due to the timing, this action has a very limited impact on UTSAT's objective for fiscal year 2024-2025. As a reminder, UTEL says financial objectives exclude the impact of sanctions imposed on Russian customers by external authorities. Moving to connectivity, third quarter fixed connectivity revenues stood at 59.7 million euros, up 0.8% year on year. They mainly reflected on the one hand the continued growth of LEO enabled connectivity solutions and On the other, the more challenging conditions for geo-enabled consumer broadband in Europe, and notably the cessation of revenue recognition from a specific customer on the CONNECT VHTS satellites. Quarter on quarter, revenues were down 7.3%, reflecting a one-off impact from catch-up revenues from a Leo customer in Q2, as well as the above-mentioned cessation of revenue recognition from a GEO customer. On the commercial front, the transfer of UTELSAT connect capacity to the African market has been completed. Take-up of the additional capacity has been dynamic, notably with the multi-year partnership with Orange for connectivity in Africa and the Middle East. Elsewhere, UTELSAT and INTERSAT inked a new multi-year agreement for KU capacity on UTELSAT 7C for the delivery of fixed data services over Central and Eastern Africa and renewed their existing capacity contracts on UTELSAT 7TB. The two companies are in discussions aimed at adding LEO capacity for East Africa. Third quarter government services revenues stood at 49.5 million euros up 10.2% year-on-year. This mainly reflected the growth of LEO-enabled solutions revenues, as well as increased demand from non-US governments. Quarter on quarter, revenues were down 4.2%, notably due to slowdown in geo-activities. The spring 2025 renewal campaign with US Department of Defense resulted in an estimated renewal rate of less than 50%, below the high rates of previous quarters. It reflects the change in the new presidential administration geographic prioritization for the Defense Department, with the additional context of efforts to cut government spending overall. In particular, it embarks a non-renewal of a single sizable contract. Excluding this one-off, the renewal rate would have been close to 70%. Third quarter mobile connectivity revenues stood at 39.7 million euros, down 2.7% year-on-year, reflecting lower TO revenues, partly offset by growing demand for LEO-based solutions. Quarter-on-quarter, revenues were up 14.3%, underpinned by ramp-up on LEO. On the commercial front, UTELSAT confirmed the traction of LEO-enabled services for commercial and business aviation, with over 100 certified NT9 installations already completed, out of a backlog close to 1,000 aircrafts, and the first aircraft now in service. In addition to its GEO offering, Eutelsat is delivering multi-orbit connectivity through key partners such as Intelsat, Hughes, Panasonic, and GoGo. Air Canada became the first airline to deploy the multi-orbit GeoLeo service through Intelsat. Separately, Eutelsat signed a multi-year, multi-million dollar extension of its capacity agreement with Panasonic on Eutelsat 10B. and the deployment of CONNECT VHTS capacity for the mobility market is also progressing well, notably with a new multi-year, multi-million dollar agreement with Turksat for KA-band services. Both showcase the ongoing pertinence of a state-of-the-art TO capacity to deliver high-quality, cost-effective in-flight connectivity services. Moving now to the backlog. The backlog at the end of March stood at 3.6 billion euros versus 3.9 billion euros a year ago and 3.7 billion euros at the end of December 2024, reflecting its natural erosion, especially in the video segment in the absence of major renewals. It was equivalent to three times fiscal year 2024 revenues with connectivity representing 57% of total. Let's now turn to the outlook. On the back of the performance of the first nine months, we confirm our objectives for the full year 2024-25 of operating vertical revenues around the same level as fiscal year 2024. and adjusted EBITDA margin slightly below the level of Fiscal Year 2024. Elsewhere, gross capital expenditure in Fiscal Year 2024-25 remains expected in a range between 500 and 600 million euros. UTELSAT also continues to target leverage of around three times in the medium term and continues to work actively on the financing plan in line with its strategic roadmap and its leverage objective. With that, I would like to thank you for your attention, and together with Joanna, we are now ready to take your questions and to answer your questions.

Thank you. If you'd like to ask a question or make a contribution on today's call, please press star 1 on your telephone keypad. To withdraw your question, please press star 2. You will be advised when to ask your question. We will take our first question from Roshan Ranjit, Dutch Bank. Your line is open. Please go ahead.