Hermes Intl Sa Unsp/Adr

Welcome to the UTLSAT first quarter 2025-2026 revenues 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 5 on their telephone keypad. Now, I will hand the conference over to the speaker, Christophe Cadrelier, Chief Financial Officer. Please go ahead.

Hello, everyone. Welcome and thank you for joining us today for USTEP's first quarter 25-26 revenues presentation. I'm Christophe Cordier, CFO, and I'm joined today by Joanna Darlington, Head of Communication and Investor Relations. Let's start with the highlights of the past quarter. Leo revenues continued their robust growth rate up 70%. Overall, first quarter revenues were in line with expectations, enabling us to confirm all our full-year 25-26 financial objectives, as well as our longer-term targets. And finally, at the end of September, UTELSAT, on the 30th exactly, UTELSAT held an ordinary and extraordinary general meeting where all resolutions related to the contemplated capital increases were approved. Let's now turn to the Q1 performance. First, as a reminder, All commentary is on a like-for-like basis, that is to say at constant currency and parameter. Total revenues for the first quarter stood at 293 million euros, virtually stable at minus 0.3% on a like-for-like basis. They reflected a €10 million negative currency effect and a €7 million positive swing in other revenues, mainly from hedging, as well as revenue recognition from Iris Square related to UTADSAT's involvement as consortium system development prime. Revenues of the four operating verticals were down 1.2% on a like-for-like basis. Let's have a look at the segmental reporting. Video representing 47% of revenues stood at 133.6 million euros, a decline of 10.5%. Fixed connectivity revenues representing 22% of the group total rose 16% to 62.3 million euros. Government services 19% of revenues stood at 52 million euros, a rise of 18.5%. And finally, mobile connectivity revenues, representing 12% of the group total, stood at 34.7 million euros, a decline of 12%. I will come back to this. Let's now start with a video. As said above, Q1 video revenues amounted to €134 million, down 10.5% year-on-year. They reflect the ongoing mid- to high-single-digit secular market decline, but also the negative effect of the latest sanctions imposed on Russian channels. As a reminder, this started in July 2025, with an impact of around €16 million expected for the full year 2025-2026. On a quarter-on-quarter basis, revenues were down by 8.3%, more in line with the underlying market trend. On the commercial front, UTELSAT renewed contracts, notably with key regional player BHS Telecommunications, confirming the 7-8 degree west video neighborhood as the leading satellite position in the MENA region. Let's now have a closer look to connectivity. Total connectivity accounts for 53% of total sales and well over half of the operating vertical's revenues. First quarter revenues stood at 149 million euros up 8.6%. As stated above, this growth was primarily driven by LEO revenues up 71% to 54 million euros and representing over one third of the connectivity top line. The LEO trend fully offsets the geo-connectivity decline of 10% to 95 million euros. quarter-on-quarter revenues were down by 13.2%. This sequential decline was mainly the reflection of an exceptionally high level of LEO terminal sales in Q4-24-25 across all three verticals, but predominantly government services and mobility. As a result, LEO revenues in the first quarter were down 20%, reflecting this impact as well as the non-recurrence of catch-up revenues recorded in Q4-25. Let's look at each vertical in more detail now. Q1 fixed connectivity revenues stood at 62 million euros, up 15.9% year-on-year, reflecting continuing growth in LEO services. revenues were impacted by the cessation of revenue recognition from TIM on Connect VHTS since January 2025 with an annualized impact of around 12 million euros. As a reminder, this impact will wash through as of Q3 2025-2026. On a quarter-on-quarter basis, revenues were down by 6%. This reflected, in particular, more challenging conditions for geo-enabled solutions. On the commercial front, UTELSAT signed a strategic partnership with Twisas for LEO connectivity in Greenland, as well as an agreement with NELCO, part of the TATA group, to deliver LEO connectivity across India. Moving to government services, revenues stood at 52 million euros, up 18.5% year-on-year. This rise reflected the growing demand on LEO-enabled connectivity solutions for governmental applications, notably with services delivered in Ukraine. On a quarter-on-quarter basis, revenues were down 17%, reflecting mainly the above-mentioned terminal impact. Mobile connectivity revenues stood at 35 million euros, down 12.1% year-on-year. They mainly reflected lower geo revenues, as well as the non-recurrence of a one-off contract in aviation for about 3 million euros in Q1 2425. On a quarter-on-quarter basis, revenues were down by 19%, reflecting a one-off revenue catch-up in Q4 2025 and a slowdown in GEO in addition to the above-mentioned terminal impact. Moving to backlog, it stood at 3.5 billion euros at the end of September 2025, stable versus end of June 2025. It was equivalent to 2.8 times fiscal year 24-25 revenues with connectivity now representing 58% of the total. Let's now turn to the outlook. The first quarter performance was in line with our expectations with a further sharp rise of LEO revenues of setting the decline in GEO. which embarked the impact of further Russian sanctions in video from July 1st. As a result, we confirm our fiscal year 25-26 financial objectives with revenues of the four operating verticals in line with the level of fiscal year 24-25, LEO revenues to grow by 50% year-on-year, an adjusted EBITDA margin slightly below the level of fiscal year 2024-2025. Gross capex expenditure is expected in a range of 1 to 1.1 billion euros. Following the contemplated capital increases announced in June 2025 and due to be completed by the end of calendar year 2025, Net debt on adjusted EBITDA ratio is estimated at around 2.5 times by year-end 2025-2026. Our longer-term objectives are also confirmed. Revenues of the four operating verticals between 1.5 to 1.7 billion euros by the end of fiscal year 2028-2029, with LEO revenues significantly outperforming the market. Operating leverage, driving a mid to high single digit percentage point improvement in the EBITDA margin, resulting in a margin of at least 60% by fiscal year 28-29. With that, I thank you very much for your attention. And together with Joanna, we are now ready to take your questions.

Ladies and gentlemen, if you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.

evening everyone uh thank you for the questions um i've got three please uh firstly uh on video um we saw a bit of a steeper decline this this quarter um with the russian sanctions um and christoph in your comments you mentioned a mid to high single digit decline can i can i check is that the headline decline uh expected or is that kind of the underlying decline i.e the mid single digit is now maybe could be high single digit within video. I'm just wondering if there are any kind of big video renewals expected this year. Secondly, within government, a good kind of performance you highlighted outside of the US. Any details on the French framework agreement? Is there any contribution from that agreement within the government segment, please? And lastly, just on the LEO revenues, we did see this quarter-on-quarter decline, I guess, equipment sales driven. When should we start thinking that the revenue mix moves much more into the services components, and therefore we should see a quarter-on-quarter growth within standalone LEO? Thank you.

Okay, very clear. Thanks, Roshan. So if I start by your first question related to video, I mean, as you said, and as we commented, the biggest impact for this quarter is obviously the secession of some of the Russian channels following the sanctions. But yeah, I mean, we already mentioned in the last session in the last communication that the decline we saw on video, I mean, obviously, if you look quarter by quarter, as usual, you may have some hiccups and it might vary a bit or be different from one quarter to another quarter. But yes, I mean, we confirmed that the trend that we see is a more mid to high single digit rather than low to mid single digit. So that's for the video part. For the Gov, so you mentioned first of all the US part as a precision, I would say that and to make sure that we're clear. the US gov used to be in the past a very significant proportion, if not almost the sole proportion, the integrity of the video business for UTERSAT. It now represents less than 50% or less than half. And the increase coming from other governments. I mean, we mentioned Ukraine, but not only. more specifically related on the discussion of the contracts with the French DOD, or the French so-called Direction Générale de l'Armement. And the main contract agreement, it's not a contract, it's a framework agreement that was signed with the French MoD is Nexus. So as a reminder, this is a framework agreement that is due to last for 10 years. It does include different elements, obviously capacity and services, but also development, co-development in order to reinforce certain aspects of the military purposes. And it also includes hosted payload. So at this point, it's a framework. We are currently working and discussing with the French MOD and so-called DGA in order to finalize and to precise more the content of this framework agreement with the objective to start the recognition of revenues as from fiscal year 26, so as from this year. We are in particular discussing the content and the hosted payloads and in order to secure a first contract on these specific items by the end of this year. But I can say that generally speaking, the revenue generation from this contract will be heavily, I would say second half loaded during the period of the nexus agreement, which I remind is a 10 year agreement or 10 years framework. So this will come more in the later part of this agreement. Moving now to your question on LEO and the mix of the sales of the LEO. I mean, clearly what I would like to stress on is, first of all, that the high level of equipment sales is a good sign. It's a very good sign because that means that, you know, more and more the usage of the Constellation is increasing significantly, is increasing at the pace of the development of the installation of the so-called UTs. What I must also stress that, again, Q4 was a bit specific, but the proportion between equipment sales and service revenues in the total revenues is still, equipment are still representing a minor part of the total sales. And I would say that also you have a kind of delay a bit because the equipment that are installed and that are sold today allow also our customer to use more of their take-home pay, so more of their capacities that they have already contracted. And again, it's showing a significant increase in the usage of the constellation, not directly or not immediately an increase in revenue recognition because it's already taken into consideration in some of the take-home pay. Obviously, it also increases what we call the pay-as-you-go. I mean, the more UTs you have, obviously, the more pay-as-you-go you also have. But again, and I want to stress what I said, it's still, I mean, it's a minor part of the total sale. It's not the majority that is represented by equipment sales.

That's great. That's very clear. Can I just check, mine apart, are we talking about 20% of the Leo revenue basis equipment, perhaps?

Well, really, it's not any detail that we give, and it depends from quarter to quarter. It's difficult for me to tell you more on this. Okay, understood.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key or hashtag 5 on your telephone keypad. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Ben Rickett from New Street Research. Please go ahead.

Hi. Thanks for the question, and good evening, guys. I have two questions, please. First question is just around the sort Ben, can you speak up a bit, please?

Ben, sorry, we can't hear you.

Is this better now? Can you hear me okay now?

It's still a bit lower, Ben. Try to increase on our side.

Okay, I'll try and really shout, so hopefully this works.

Okay, thanks.

So first question, just around revenue saving. So it was down 1% in Q1. Do you expect, I mean, for the full year, will we be around that level, or should we expect revenue to improve throughout the year? Is there any sort of particular saving we should be aware of? And then the second question, Could you give us an update on the Iris Squared process, the technical review process, and also specifically, could you say anything about the possibility of the UK joining Iris Squared? Thank you, and I hope that was clear.

Okay, thanks. Thanks, Ben. So for the first question, I mean, clearly, you know, we gave our objectives and, you know, we confirmed our full year objective of a level of operating verticals revenues for this fiscal year 26 in line with the one of last year, so 25, meaning that the significant increase in Leo revenues, I remind that we expect we are at plus 70% compared to last year for Q1, but for the overall year, we expect a growth of Leo revenues of around 50%. And this will offset the decrease of geo revenues, both on video and connectivity. But so the trend is, as we confirm, the trend is to be at the same level of last year. On the Iris Square question, maybe Joanna can give some more insights.

Well, I can't really. So, yes, like you, I also did see the article where a French minister was talking about the UK being welcome to join Iris Squares. But I don't think it's anything that's particularly concrete, and it's certainly not something that we've heard, particularly with our discussions with our institutional counterparts in the UK. So... I think obviously from our point of view it would be very much welcome, but I'm not really aware that there are a lot of legs to that particular story.

Okay, that's helpful. Thank you.

As a last reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. We will wait a few moments to allow people to join the queue if they want to participate. The next question comes from Roshan Ranjit from Deutsche Bank. Please go ahead.

Hi again, sorry, I'll take the opportunity for another question. Just on the equity injection, you reiterated closing by the end of the year. Are there any, you got all the approvals on the governance side, but are there any regulatory approvals that are still waiting as part of the process, either as part of the reserved capital increase or the, I guess, true rights issue, anything you could say there? Thank you.

Yeah, I'm very clear, Roshan. So we have all the authorization, all the regulatory approvals, but there is one piece missing, and this one is coming from the U.S., As you may remember, we need to have two approvals actually from the US. One is coming from the foreign investment side. And this one, which is CFIUS, called CFIUS. And this one is fully obtained, so it's secured. We have another one as we are in the telco environment. So there is another one. that another authorization that is needed coming from the FCC. And this one is still pending. And obviously, with the current situation in the US, with the current shutdown, it's taking a bit more time. So we're still waiting for this approval. But we expect, as we confirm, we expect to execute both the reserve capital increase and the rights issue before the end of this calendar year. So before the end of December.

Great. Thank you.

The next question comes from Stéphane Bayazhin from AutoBHF. Please go ahead. Stéphane Bayazhin, your line is now unmuted. Please go ahead.

sorry is not hello can you can you hear you now stefan oh i'm i'm sorry about that apologies uh yeah i was just wondering whether you can make any comment on the competitive environment generally speaking in your in your different segments if you've seen any any changes um lately i mean we know amazon is also you know progressively trying to come into the market so um you know any comment thank you no thanks stefan for your question um

I mean, nothing really new from, you know, last time. I mean, we have discussed that in previous meetings and previous communication with obviously, you know, the fast ramp up of Starlink. I mean, I think we're still in the same situation. We still see a strong progress of Starlink on the broadband and the B2C segment, as you know. For the other ones, I would say, I mean, we are, again, the only two players. Sorry, Amazon, I mean, is going to come, but we don't really know exactly when as we speak, right? It still needs to be confirmed. But at this point, I have nothing else to comment compared to what we see. I mean, the market, clearly, the demand for connectivity by satellite and more specifically from Leo constellation is growing and is growing fast. The competition is still the same and we're still expect to have at least Amazon to come in the coming years and others. But I mean, I have nothing to add on that.

There are no more questions at this time. So I hand the conference back to the speakers to conclude the call.

Well, thank you. Thank you very much for your questions. And I wish you now a very pleasant evening for those in Europe and good day for those in the US, if any. And let's speak and let's gather during our next financial communication. Thank you very much, everyone. Bye-bye.