Sesa Spa

Hello and welcome to the SES Half Year 2024 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 0 and you'll be connected to an operator. I will now hand over the call to your host, Richard Whitening, Head of Investors Relations, to begin today's conference. Thank you.

Good morning, everyone. Thanks for joining this analyst and investor call for the H1 2024 results. The presentation was uploaded along with the press release to the investor section at SES.com if you don't already have it. As always, please note the disclaimer on page two. The agenda for today is outlined on page three. In a moment, Adele Alcelet, our CEO, will present the main business highlights, followed by Sandy Chauvin, CFO, to cover the financials in more detail. After some closing remarks from Adele, we will take your questions. So, with that, let me hand over to Adele.

Perfect. Thank you, Richard. Good morning, everyone. I'm pleased to be reporting a solid first half of execution and important milestones that we have reached. Let's start on page number five. First of all, HF1 revenue and adjusted EBITDA were fully in line with our projections and will remain on course to deliver on all of our financial targets for full year 2024, with adjusted EBITDA tracking to the upper half of the range that we've given. Second, HF1 reflected continuous strong performance in our networks business. We reached that crossover point in 2023 to now account for over 54% of the total revenue of the company. Government was a standout performer and secured impressive wins across both the U.S. and global government business. Air on cruise, including the periodic revenue in first quarter and cruise, also delivered strong growth. Third point, bringing Empower into service in April was a significant milestone for us, and we're now ramping committed customers onto the network. I also got to experience my first SES launch with Astro 1P, taking off in June. This is an important satellite for us. It sustains the long-term cash flows for our immediate business in the neighborhood at 19.2 degrees east, where we serve almost 120 million households. That's over 300 million people. Lastly, and most significantly, our transformational agreement to acquire Intelsat and integration of the two companies will, from expected closing the second half of next year, create a stronger multi-orbit operator. The combined company will be well positioned to compete with competitive end-to-end solutions in valuable growth markets where we have the right to win, underpinned by strong balance sheet fundamentals and sustained cash flow growth to drive value for customers, employees, and shareholders. Moving to our key financials on page six. Revenue of 978 million euros and adjusted EBITDA of 528 million euros were broadly stable year on year. As I mentioned, we delivered a growing performance in the networks. Meanwhile, media performance was consistent with our expectations. We secured important additional signings that underscored the solid fundamentals and cash flow generation of this business going into the future. Executioner and laser focus on efficiency and cost means that adjusted EBITDA is tracking well. We expect full year 2024 to be in the upper half of the target range set in February. Adjusted free cash flow was 70% year-on-year, partially helped by lower run rate and capex than what we had expected. We'll remain within the guidance of 500 to 550 million euros for the full year. Finally, our backlog stood at 3.8 billion euros at the end of June, including some 430 million euros of signings across the business in the first half of the year. Pipeline for the second half of the year looks good, which will keep our backlog healthy. Let's move to page number seven. I wanted to share two important wins in the first half of the year. The first example is a government solution where SEF Station Defense has been awarded a multi-year contract by U.S. Air Force Air Combat Command to support its remote piloted aircraft training and testing program. The contract is totaling 47 million U.S. dollars. The important highlight of this is that this is the third contract iteration for the U.S. Air Force mission, which shows you the long-lasting partnership we have with these customers. We will deliver transmissions, coverage of the U.S. and the Pacific Ocean, as well as network management and monitoring solutions. Second example is a media example, where RTL Deutschland recently extended their long-term partnership with SES at 19.2 degrees east with a new contract worth tens of millions of euros that will run to the end of the decade. in addition to satellite capacity, we will now be providing value-added uplink services for their TV channels, expanding the scope of our relationship with RTL, as well as the contract duration. There are many other examples in government with NASA and the U.S. Army, in mobility with Virgin Voyages and Resort World Cruises, in fixed data with INRED, and in media with QVC and Kiva Monica. Let's move to slide number eight. Moving to the performance of the business units in the first half in more detail. With networks, you can see that the revenue grew 5% year on year. In the networks business, the government, we improved it by 8.4% year on year with high single-digit expansion in both U.S. and global business across the world. Mobility was at 11.1% year on year growth. That included double-digit growth in maritime from the periodic revenue we booked in Q1, and new cruise ships that were added to our service portfolio, as well as single high-digit growth in aviation for new contracts signed to support IFC partners. In fixed data, the comparison to last year is impacted by the periodic revenue we recognized in first quarter 2023, which accounted for two-thirds of the variance. Excluding this item, the business was down by low single-digit percentage, as lower revenue from Europe and Asia was largely offset by growth in Latin America. Network's backlog stood at 1.9 billion euros, with some 310 million euros of signings in the first half of the year. As I highlighted already, the entry of Empower into commercial service was a key milestone for SES, with committed customers now being deployed. We'll remain on track to expand the initial constellation of MPAR starting with the next launch of Satellites 7 and 8 at the end of this year. Followed in 2025 with Satellite 9 and 11, 9, 10, and 11, I should say, and in 2026 with Satellites 12 and 13. With that, increasing the capacity of the network and accelerating our profitable long-term growth trajectory. Turning to page number nine, notwithstanding the headwinds we're facing on the top line, the fundamentals of our immediate business remain robust and supportive of solid cash generation for business which delivers high-quality content to worldwide audience of 363 million households. Ladies and gentlemen, that's over 1 billion people. The DUS business, including our popular HD1 consumer platform, is our most valuable business within media, generating over 300 million euros of annual revenue as used by the public and free-to-air broadcasters, as well as some 18 million direct-to-home households. SES value proposition in this segment was evident in the stable revenue performance in the first half of the year and improved trajectory over previous years. The rest of Europe is our second largest unit, also generating over 300 million euros per year, delivered to our expectations with an expected mid-single-digit decline year over year. Meanwhile, we continue to focus on managing the structural headwinds across other markets, especially in the mature markets in North America and Asia. Our sports and events business continues to be a standout performer with double-digit revenue growth and an ever-expanding list of T01 global customers, like NFL, Premier League, and, of course, Olympics. Turning to SCS to leverage our existing global reach and expertise in content management, aggregation, and distribution. SOMP successfully launched in June, as I said earlier, bringing the latest technology to replace capacity at the most valuable video neighborhood at 19.2 degrees East. We will be replacing four satellites with one. Astro 1Q will follow later and will provide redundancy and bring the ability to grow by expanding our network business further and new. Let me close out this section on page number 10. with our important and transformational agreement to acquire Intelsat for an equity consideration of $3.1 billion. Since announcing the deal at the end of April, the regulatory process of obtaining all necessary clearances is well underway, and we remain fully on track to closing the acquisition during the second half of the year. At the same time, the two companies are making strong progress in terms of detailed integration planning, while respecting all legal and regulatory requirements as the two businesses continue to operate fully independently. I believe most of you have seen the financial information that Intelsat has published on the website. They're continuing to execute well against their full-year revenue and adjusted EBITDA targets and supporting their own strong balance sheet. The transaction is now fully financed after a successful syndication of 3 billion euros compromising of 2.1 billion euro bridge facility and 1 billion U.S. dollars term loan, providing us with financial flexibility to get leverage over time. Also importantly, and as expected, both Moody's and Fitch confirmed SES's investment-grade rating after the transaction was announced. This acquisition is significant in four key areas. First, it is highly equity. We have a clear line of sight to achieve 370 million euros of combined OPEX and COPEX synergies. And through the integration planning work that I mentioned, we're building robust execution plans that we will be implementing starting on day one of close. This will ensure that we can deliver 70% of the total synergies by no later than the end of year three. At the same time, We'll continue to explore opportunities we believe are there to capture additional synergies. Second, the combination of our complementary satellite fleets, ground networks, spectrum portfolios, and capabilities will create a stronger multi-orbit competitor capable of providing greater service options and resilience. Third, 60% of the combined revenue is generated from valuable growth segments where the benefits of a multi-orbit architecture are best placed to serve sophisticated requirements for reliable high throughput and low latency connectivity. Lastly, the acquisition accelerates profitable growth and cash generation. Sandeep will cover this in more detail shortly. But we expect that with a growth in the combined business and synergy execution, the combined company will be generating more than 1 billion euros of free cash flow by 2027-2028 timeframe, i.e. within two to three years of closing. With this ramp-up, we achieve rapid deleveraging with net leverage reducing to below three times within 12 to 18 months of closing. With this profile, we will build potential for increased level of shareholder return in the future through our progressive dividend and or additional share buybacks. And of course, we simultaneously enhance financial flexibility to invest profitably in network and service innovations, as well as applications of the future to ensure that SEX remains competitive in the fast-moving and dynamic SATCOM industry. With that, I will turn it over to Sandeep to go through the financial in more detail.