Eutelsat Communications

Welcome to the Udalsat Half-Year 2025-2026 Results Presentation. For the first part of the conference, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speaker, Jean-Francois Fallaché, Chief Executive Officer, and Sébastien Rouge, Chief Financial Officer. Please go ahead.

Hello, good morning, everyone, and thank you for joining us today. I am Jean-François Fallacher, CEO of Eutelsat, and I am joined on this call by Sébastien Rouge, our new CFO. So before getting into the details, a quick recap of the highlights of the first semester, which has been truly pivotal for Eutelsat. In terms of performance, first half operating verticals were almost stable. Within this, Leo revenues were up nearly 60%. reflecting the ongoing strong commercial dynamic and driving rise in revenues in all three connectivity verticals. The adjusted EBITDA margin is just over 52%. It's reflecting the impact of sanction-related loss of video revenues as well as the effect of the product mix with Leo revenues that are still during their ramp-up stage. As a result of the first half year performance, we are able to confirm our full year financial objectives. We made great strides in our refinancing plan with the successful completion of our 1.5 billion capital raise in December, leading to credit rating upgrades from Moody's and Fitch. Subsequently, we have recently announced that we obtained almost 1 billion euros in export credit agency financing. We have also secured operational continuity for the OneWeb constellation with the procurement of a total of 440 new LEO satellites with technology enhancements. Finally, the disposal of our passive ground segments asset has been halted. While disappointing, this has no impact on Eutelsat's ability to finance its strategic development plan. And I will come back to this later. Now let's have a quick look at the key financial data. Total revenues for the first half stood at €582 million, stable on a like-for-like basis and down 2.4% reported. Revenues on the four operating verticals stood at €574 million. They were down 0.6% on a like-for-like basis, excluding a €20 million negative currency impact. As stated above, LEO revenues grew almost 60% to 111 million euros. An adjusted EBITDA was equating to a margin of 52.1% on a like-for-like basis. That means excluding currency and hedging effect, the EBITDA margin declined by 3.4 points. CAPEX. was at €291.5 million, but clearly should not be extrapolated for the year as a whole. We will come back to this. Let's now have a look at our H1 performance in more depth. Noting, please, that all commentary from now on will be on like-for-like basis, EDMS at a constant currency rate. Let's have a look at our revenues by vertical. I remind they stood in total at €592 million for the last semester. So revenues of the four operating verticals excluding other revenues amounted to €574 million. Video is representing 46% of the revenues, €266 million, down 12%. And I am pleased now to note that all the connectivity verticals delivered growth this semester. Fixed connectivity representing 23% of our revenue was up 17%. Government services representing 17% of the revenues was up 8%. And mobility representing 13% of the revenues up 8.5%. Our other revenues amounted to 18 million euros. This is reflecting a revenue recognition from IRI square project. As you know, we are involved in the consortium system development, in the consortium as consortium system development prime. And these other revenues are also including 8 million euros positive impact from hedging operations. Let's now zoom in the video business unit in the video segment. First, our video revenues were down by 12.3% to €260 million. They are reflecting the impact of further sanctions imposed on Russia. This is amounting to circa €16 million for the full year 2025-2026 as a whole, which came on top of the underlying trend in this mature business. Second quarter revenues stood at 133 millions, down by 14.1% year on year, but broadly stable quarter on quarter, as you can see there. And on the commercial front, we had good news. We announced several renewals with quite long-standing partners at very key orbital positions. notably BEIN, the media company, for distribution of DTH services across the MENA regions. This is reaffirming the strategic value of our 7-8 degree wet video neighborhood. And in Europe, we were very pleased to announce the renewal of the deal with Polsat. We renewed a multi-year, multi-transponder contract at the very flagship Hotbird video neighborhood. Let's now take a closer look at the connectivity. Our total connectivity revenues for the first half to that 307 million euros, up by 11.8%. Within this mix, geo revenues to that 196.8 million euros, which is a decline of 4.5%. And as you can see, this decline was more than offset by the strong ongoing momentum in EU revenues, which rose 60% up to 110.5 million euros. And second quarter revenues stood by 157.9 million, up by 15% year-on-year, and by 5.8% quarter-on-quarter. Year revenues up 50% at 56.4%, while GEO revenues were stable, as you can see there, at 101.5 billion euro. Let's now zoom in each vertical in more detail. I will start with the fixed connectivity vertical. The first half fixed connectivity revenues, they stood at 132 million, up by 72% year-on-year. This is clearly reflecting the continued growth on LIO-enabled connectivity solutions. as well we have a one-off impact and this is resulting for the upfront recognition of revenues relating to a capacity contract with a geo customer for an amount of circa 7 million euro the second quarter revenues stood at 70 million euro up 18.3 million year-on-year On the commercial front, the TELSAT reinforces presence in Africa with a distribution agreement with MS Telecom in Angola for LEO services for businesses located in hard to reach regions, as well as new multi-million, multi-year agreement with Paratus for services across southern Africa. Let's now have a look at the government services segment. Revenues stood at 99 million euros, up 7.7% year-on-year. They are reflecting again here the growth of LEO enabled solutions, notably with the number of services delivered in Ukraine, as well as increased demand from other governments. Second quarter revenues stood at 46 million, down by 2.2% year-on-year. This is mainly reflecting the softer revenues coming from the US. as well as lower terminal sales in Q2 than Q1. Key highlights of the past semester are including the successful partnership with Airtel to support the Indian Army's relief operation with LEO connectivity and we had also some activities in flood impacting Sri Lanka. Elsewhere, UTELSAT obtained approval for the first military crate MANPAC terminal which is with our one web network. This is a terminal for the armed forces developed in partnership with intelligent technologies. It's now this terminal is now available to government and defense customers that will need a portable, resilient connectivity solutions. Now let's have a look at the mobility segments. Revenues today are at 77 million euros, up 8.5% year on year, reflecting the activation of contracts with aero mobility customers. We now have almost 600 certified antennas installation on planes. out of a backlog of over 1,500 aircrafts compared to what we had last year, 100 certified antennas and a backlog of 1,000 antennas. So you see the great evolution of our backlog and the number of antennas which are actually active on planes. This impact is even more visible on the second quarter, where revenue stood at 42 million, up to 34% year-on-year and 21% quarter-on-quarter. On the commercial front, we're happy also to pinpoint the multi-year deal we've inked with CMA, CGM group on maritime. This is a deal we closed with Marlin to integrate one web into the connectivity solutions of CMA-CGA global maritime fleet. Elsewhere, UTSAT OneWebU network will provide passenger Wi-Fi services on railways. We have signed a deal with Transgabon in partnership with RTEL Gabon. This is also reinforcing the UTSAT RTEL partnership. And this is the start of a business we are going to do in rail connectivity across Africa. Let's now, if you wish, have a look at the backlog The backlog stood at 3.4 billion euro on end of December 25 versus 3.7 billion a year earlier. This backlog of 3.4 billion is equivalent to seven times the 2024-25 revenues. And for you to know, connectivity represents 59% of the total backlog versus 56% a year ago. This evolution is reflecting the rapidly increasing weight of Leo business in the mix. And as a reminder, these Leo business contracts tend to be shorter. Moreover, only the secured elements of the take-or-pay contracts, the Leo take-or-pay contracts, are recognized in this backlog, while what we call pay-as-you-go contracts are not reflected in the backlog at all. As a result, white remains a useful indicator. The evolution of the backlog is a bit less correlated, is now less correlated with future revenue trends than it used to be in the past. Let's now turn to the financial performance and I will pass the floor to Sébastien.

Thank you, Jean-François. Good morning, everybody. Revenues were covered in detail, so let's now jump to group profitability. Adjusted EBITDAs to that 308 million for the half year ended on the 31st of December, compared to 335 million a year earlier, so down by 8%. On a like-for-like basis, it's down 6.1%. Operating costs stood at 283 million, up 12 million and well contained in spite of the large growth of the LEO business. They reflected mostly an increase in this related cost of goods sold. as the adjusted EBITDA margin stood at 52.1% reported versus 55.2% a year earlier, so down 3.1 points. It is a consequence of the impact of sanction-related losses on video revenues, as well as the effect of product mix within Leo revenues during the ramp-up stage. If we look now at the rest of the P&L, the net result was a loss of 236 million, largely reduced from the loss of 873 million a year earlier. This reflected limited other operating losses at 69.6 million as compared to 691 million last year. As a reminder, in the first half of 24-25, we included goodwill and satellite impairments totaling 650 million. You can note we have also lower DNA at 357 million versus 434 last year, reflecting notably the end of the amortization of certain intangible assets. As well, we have the positive effect from the securing of operational continuity of the LEO constellation, and that follows the procurement of the additional 340 satellites. Finally, we have a favorable currency impact in DNA. Net financial cost of 95 million versus 99 last year, notably reflecting lower interest following the full repayment of the 2025 bond. And finally, corporate tax of 21 million versus 7.6 last year. That's an effective tax rate of 10%. if we move now to our capex plan gross capex amounted to 292 million as compared to 175 million a year earlier this reflects the timing of key milestones in leo investment programs we i will remind you should not be extrapolated for the full year since most of the investment will be deployed in the second half Nevertheless, because of the phasing of LEO programs, as well as an increased vigilance on our GEO spent, CAPEX for the full year is now expected around 900 million, while we announced 1 to 1.1 billion previously. Going forward, CAPEX will remain focused on LEO activities in line with the group's strategic vision, primarily for the OneWeb follow-on program. GEO CAPEX will be limited to ensuring service continuity. In this context, the Group has cancelled the procurement of the so-called FlexSat Americas, following a review of its business case, resulting in future CAPEX savings over €100 million. Now in terms of financing structure of EUTELSAT. The most important thing, on December 31st, 25, net debt stood at 1.3 billion, down 1.3 billion as well, versus the end of June 25. That is clearly reflecting the net proceeds from the capital increase. As a result, the net debt to adjusted EBITDA ratio stood at two times as compared to 3.9 times at the end of June 25. It will not stay at this level up to the end of the year because of the phasing of CAPEX, which is skewed to the second half. The average cost of debt after hedging stood at 4.2%. It was 4.8% in the first half of last year. Weighted average maturity of the group's debt is 2.3 years as compared to 3 years at the end of December 24. We enjoy a great level of liquidity with undrawn credit lines and cash, which stood in total around 2.1 billion. On this good note, now back to Jean-François to comment the outlook and next steps.