Sesa Spa

Welcome to the SES Half Year 2025 Conference Call. My name is Alan and I will 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 0 and you'll be connected to an operator. I will now hand you over to your host, Christian Kern, Head of Investors Relations, to begin today's conference. Thank you.

Thank you, Alan. Good morning, everyone, and thank you for joining us today. It is my pleasure to welcome you to SES First Half 2025 Results Call on behalf of our management team. Before proceeding with the management presentation, we would like to inform you that the financial information contained in this document has been prepared under international financial reporting standards. As usual, this presentation may contain announcements that constitute forward-looking statements which are no guarantees for future business performance and involve risks as well as uncertainties. As certain results may maturely differ from those in these forward-looking statements due to several factors. We invite you to read the detailed disclaimer on page two of the presentation, which is also available on our company webpage. Today, I'm joined by our CEO, Adel Alsaleh, and our recently appointed CFO, Lisa Pataki, who will take you through the presentation followed by a Q&A session. Adel, without further ado, over to you. Great.

Thank you, Christian. Good morning, everyone. I will start the presentation with the closing of the transformational Intelsat acquisition on page number four. We're all excited to have reached this pivotal moment for SES. On 17th of July, we closed the acquisition of Intelsat and brought together two very strong satellite players, creating a global multi-orbit connectivity powerhouse. This is a compelling value acquisition focused on the future with significant and readily executable synergies from day one of closing with 60% of revenue in high-demand growth segments. This transaction combines complementary assets, capabilities, and innovations to deliver world-class solutions to our customers anywhere in the world. Overall, it accelerates the company's profitable growth outlook and cash flow generation over the medium term. On page number five, we show the combined strength of SES and Intelsat. We now operate a powerful fleet of around 120 state-of-the-art geo and neo satellites in a multi-orbit, multi-band network supported by an extensive ground network covering 99% of the world's populated region. In combination with strategic access to neo satellites, this unmatched scale and flexibility positions us to accelerate profitable growth, delivering a unified solution that meets our customers' most demanding connectivity needs. Moving to page six, you see our stronger combined financial profile. With pro forma financial year 2024, revenue of 3.7 billion euros, adjusted EBITDA of 1.8 billion euros, and adjusted EBITDA less capex of close to 1 billion euros. Following the acquisition, the combined top line has almost doubled, establishing a more robust financial foundation for SES. This stronger financial profile is supported by a combined contract backlog exceeding 8 billion euros, providing visibility into future revenue streams with 60% of the combined revenue and growing network segment, driving top line expansion and strengthening our position as top tier player. We expect the combined company to grow adjusted free cash flow before Iowa Square to over 1 billion euros by 2027-2028 and to deliver significant value for our shareholders. We remain committed to investment-grade metrics as we target to reduce net leverage below three times within 12 to 18 months after the deal closes. This robust combined financial profile gives us the opportunity to grow the business, invest in innovation, maintain our investment-grade metrics, and deliver attractive returns to shareholders. On page seven, a reminder our synergy plan is strong, and we're highly confident about our execution plans, which are well underway. We have identified total savings with an NPV of 2.4 billion euros. We're on track to achieve 70% of these synergies equivalent to a 260 million euros annual run rate by the end of the third year after the acquisition. The total synergies include 210 million euros in OPEX and 160 million euros in CAPEX, clearly demonstrating the powerful value creation potential of this acquisition. As we're creating a stronger multi-orbit operator, we're becoming the leading force in a fast-moving multi-orbit SATCOM landscape. Together, SES and Intel bring end-to-end solutions, cost efficiency, and unmatched global coverage, meeting market demand, just what keeps going. However, this deal is not just about scale. It's about shaping the future of global connectivity. I would like to remind you of our growing segments where the combined company operate and drive cash flow generation. Together, we support over 60 government organizations, including European governments and U.S. government. We're all well-positioned to tackle the sovereign capabilities governments now demand with multi-orbit network. The newly announced GovSat-2 Irish Square Program and the NGS agreement with NATO, a great example for our strong capabilities serving increasing government demands. As media evolves, satellite broadcasting remains the most cost-efficient and reliable way to reach global audiences. Together, we deliver over 9,500 channels to nearly 2 billion viewers worldwide, with continued strong demand for live sports and events. In both mobility segments, maritime and aviation, our combined assets are uniquely positioned for continued growth for our delivery of seamless multi-orbit end-to-end solutions. We are serving five of the six major cruise lines at sea and delivering in-flight internet to 30 commercial airlines partners in the skies. In fixed data, we also play an important role serving eight of the world's 10 top mobile network operators and multiple of energy companies across the world. We're creating a stronger, more agile, more competitive SES, one built to lead across orbits, across markets, and across technologies. Moving to page number nine, let me introduce you to the new leadership team of the combined company. I'm proud that we have established a united leadership team that brings together a powerful mix of talented people, the best of both SES and Intercept, strong, international, and best-in-class experiences. With clear strategic focus and deep operational expertise, this new leadership is poised to execute on our vision, drive integration, and unlock the full value of the combined company. I would also like to take the opportunity to thank our outgoing CFO, Sandeep Jalan, for his steadfast leadership over the last five years. We're pleased to welcome our recently appointed CFO, Lisa Pataki, who is here with me. Lisa has an extensive experience in the aerospace and defense ecosystem and has completed several successful M&A finance integrations. Moreover, her ability to develop financial strategies that prioritize operational focus, efficiency, and profitable investments will strengthen SCS leadership team, helping SCS achieve our mission of being a leading satellite player. Lisa and I look forward to meeting with many of you over the next few months to discuss our business opportunities and to update you on the exciting journey ahead of SES. On page number 10, we are reaffirming our growth outlook for the combined company on the basis of the unchanged pro forma full year 2024 financials. The combined company is strategically well positioned to offer comprehensive end-to-end solutions in high-value, high-growth markets And as such, we reiterate our guidance. For the period of 24 to 28, we expect revenue growth of low to mid-single-digit CAGR and adjusted EBITDA growth of mid-single-digit CAGR. We continue to discipline investment approach in future growth, with annual capex averaging 600 to 650 million euros for 2025 to 2028. We expect these metrics to drive normalized adjusted free cash flow to over 1 billion euros by 2027-2028 timeframe before Iowa Square. Our focus is clear, to grow, to lead in high potential markets, and to shape the future of our industry. This is the long-term play, and we're building with the future in mind, growing year after year, expanding our capabilities, and creating lasting value for our customers and shareholders alike. Now let's move to discuss standalone SES business highlights for first half 2025 on the following slides. With Intelsat closure on 17 of July, I'd like to remind you that 2Q second quarter is the last quarter of standalone SES performance. So this section of my presentation is dedicated to standalone SES performance, starting with page swapping. In the first half of 2025, we had a solid financial performance and are on track for our reaffirmed financial year 2025 outlook, underscoring that our evolved strategy is delivering positive operational and financial results. O3B empowers driving future growth with Satellite 7 and 8 now in service and Satellite 9 and 10 successfully launched on 22nd of July. We continue to see commercial momentum across networks, which demonstrate the growing demand for our differentiated service solutions. Page 13 summarizes our solid first half 2025 financial performance. I'm proud to say the first half of the year produced a solid set of results with revenue stable year-on-year, reflecting strong operational execution led by networks growth of 10.3% year-on-year. including some periodic revenues first quarter. First half 2025 adjusted EBITDA was also in line with our expectations of broadly stable year-on-year with a 53% margin. Adjusted EBITDA trends have been underpinned by solid top-line growth to the networks and nearly 5% reduction in controllable operating expenses as we continue to transform and drive operational excellence throughout the business. first half adjusted free cash flow was 193 million euros, up 47 million euros year-on-year, or 32% higher year-on-year, excluding restricted cash and special items. In first half 2025, we secured 690 million euros of renewals and new customer contracts, with the majority coming from our growth segments, supporting our growth stack club of 4.2 billion euros. which has been impacted from the weakening of the U.S. dollar this period. Our net leverage on the 30th of June stood at 1.1 times before acquisition closing and includes 4.3 billion euros of cash and cash equivalents. On the back of this solid first half performance, we are reiterating our financial year 2025 outlook, stabilizing our revenue and adjusted EBITDA trajectories. On page 14, you see that we're deepening existing relationships and forging new partnerships with customers across our target markets as demand continues to grow for our unique high-value offerings. We're proud to be a trusted partner to customers worldwide. In the government sector, due to the recent geopolitical shifts, we're starting to see increased demand as government identified the need for more sovereign, secure connectivity. We have a robust pipeline of government opportunities supported by increased defense spending in Europe, including the development of a second satellite for GUSAT-2 jointly with the Luxembourg government, which I will expand on in a moment, as well as strong momentum with the U.S. government, including SES Space and Defense to provide hybrid space-based architecture to the U.S. Department of Defense through a secure, integrated, multi-orbit network Branded Simon. These agreements strengthen secure, resilient, and high-performance connectivity for NATO members and U.S.-European command. Our strategic wins highlight our commitment to innovation and growth in the government sector. We continue to progress the development of the Iowa Square project ahead of Rendezvous I later this year or early next year. we're well positioned to help Europe build secure space-based connectivity system. Our highly cash-generated media business is performing as expected, delivering in line with expectations. In first half 2025, we secured key wins, including ATP Media, enabling global distribution of over 3,000 tennis matches to 1 billion fans. And Mileto in Brazil a contract with global potential to offset past capacity losses. SEF continues to be a trusted partner to leading media companies such as Warner Brothers, Discovery, having just signed a long-term capacity agreement to deliver high-quality content to millions of TV users on 19.2 degrees east position, which is our most valued TV neighborhood in Europe. These successes highlight the continued relevance of the value of our satellite solutions for media partners worldwide. In aero, we're seeing increased traction with our open orbits, including which with Thai Airlines, Turkish Airlines, and Uzbekistan Airlines. Wins like these are driving our future growth in aviation, where our ability to deliver managed multi-orbit solutions is a source of strength, anchoring our right to win in this competitive segment. Our continued momentum in maritime, driven by strong demand from key customers like MSC, Princess, and Virgin, demonstrates our leadership in ocean ship segment. This success is powered by our end-to-end multi-orbit connectivity with managed MEO networks at the heart of the onboard passenger experience. SES completed the largest transition of cruise ships this quarter. where we help our customers move their services from geo-services to SES Cruise-empowered services. SES is redefining onboard experience with SES Cruise-empowered, thanks to our real-time network optimization that dynamically synchronizes space and ground systems between multi-orders, enabling cruise operators to maintain consistent and high-quality connectivity at all times. In fixed data, we're laying the groundwork for future growth through innovative partnerships like Link Global and Direct-to-Device, enabling new applications in remote access, emergency response, secure government communications, offshore operations, and automotive connectivity. Moving on to the vertical performance, starting with NetSource Business on page 15. where we're demonstrating our ability to win with our best-in-class solutions. Network grew 10.3% year-on-year and is now 60% of the total revenue and was driven by strong performance in government and mobility. Our government vertical is showing strong growth, up by more than 17% year-on-year, driven by expansion in both the US and global government businesses. Our mobility business is up close to 10% year-on-year with double-digit growth in aviation, complemented by solid performance in maritime, including periodic revenue related to a contract modification of 19 million euros in first quarter 2025, and also 22 million euros in first quarter 2024. Kickstarter remains the most competitive of our segments with minus 4% year-on-year, impacted by continued capacity constraints of our O3B empire fleet, which was prioritizing higher margin verticals. As we increase availability capacity on the empire constellation, we expect fixed data trends to improve. Finally, network growth backlog stands at 2.3 billion euros, also impacted by weaker dollars. having secured 510 million euros of new business and renewals this quarter with a strong U.S. and global government pipeline. Our strong growth backlog and robust pipeline support our forecast and future growth, reflecting markets' demand for our strategy and multi-orbit solutions as being essential to meeting evolving connectivity needs. On page 16, we dive a bit deeper into our largest network segment, the government. We're seeing a significant increase in government demand for secure, resilient satellite connectivity, particularly in Europe, where defense spending is increasing. Amid the ongoing geopolitical shifts and rising global tensions, we're seeing governments prioritizing sovereign capabilities and robust communications infrastructure. SCS is well positioned to meet these needs with our proven multi-orbit solutions and growing track record of trusted partnerships of serving the U.S. government as well European and allied governments. As such, we continue to see strong momentum from the U.S. government underpinned by our most recent announcement with the U.S. Department of Defense, where SCS Space and Defense will provide hybrid space-based architecture to the U.S. Department of Defense through a secure, intelligent, multi-orbit network. I mentioned that before, trademark assignment. This transformational approach using multiple orders solves the tradeoff between affordability and resilience, delivering SATCOM agility, flexibility, and reliability for forward deployed personnel. Further, we're proud to have announced GovSAT-2 just a few days ago. This latest announcement underscores the surging demand for sovereign capabilities in Europe. After the proven success of the GovSat-1 satellite, the Luxembourg government and SCS are developing a second GovSat satellite dedicated to government application. This is a public and private partnership and a 50-50 joint venture between SCS and Luxembourg that provides secure, reliable, and accessible satellite communication services for governments. It will join GovSat-1 in supporting the Luxembourg Directorate of Defense, EU, and NATO nations, as well as U.S. Department of Defense and other government users. Reinforcing SES position as a trusted partner for secure mission-critical government connectivity This investment in GovSAT 2 is in line with SES financial policy and also in line with prior combined company CapEx guidance. On page 17, we're moving on to our highly cash-generated media business. As expected, the media business declined 12.1% year-on-year on the back of lower revenue in mature markets due to capacity optimization SE channel switch-offs, as well as the full Q2 quarter impact of the Brazilian customer bankruptcy. We have secured 175 million euros of long-term renewals and new business, underscoring the significant cash flow generation of our video business and contributing to our gross backlog of 1.9 billion euros, serving 362 million households worldwide. That's about 1 billion viewers. Our revenue and operational performance highlight the strong fundamentals and steady demand in our video business. We're expanding beyond capacity to offer integrated media services, adding our ground capabilities and managing more of the distribution chain to simplify operations for our customers as satellite TV remains the most cost-effective transmission method with continued strong demand for linear TV content and live sports and events. On page 18, we illustrate the deployment of our O3B Empower Constellation, which extends our capabilities and supports our revenue growth, keeping pace with customer demand. O3B Empower Satellite 7 and 8 are already delivering advanced high-performance connectivity to meet the evolving needs of our customers since May. I'm very excited that on 22nd July, we successfully launched Satellite 9 and 10 on an optimized launch schedule with a service entry expected at the start of 2026. This will further boost network capacity and resilience earlier than what would previously be expected. The remaining satellites 11 through 13 will be launched in 2026. The additional 303B Empower satellites will bring up to a threefold increase in available capacity by 2027, when the entire O3B Empire constellation will be fully deployed, accelerating our profit, profitable, and long-term growth trajectory. In 2027, we will manage a robust constellation of seven healthy MEO satellites, complemented by the initial six satellites. The scalability of our MEO network allows us to regularly add satellites incrementally ensuring capacity growth aligns with customer demand while maintaining a balanced supply-demand ratio in capex-efficient manner. Each new satellite enhances the constellation, boosting overall capacity and network efficiency to support long-term profitable growth. IRIS Square is strategically timed to commence services by 2030, coinciding with MPower steady-state operations. Together, They will meet growing demand well into the next decade. Additionally, the second GUSAT satellite, an IRIS Square, will expand coverage beyond Empower's reach, unlocking new opportunities for media-based services in previously inaccessible regions, including seamless pole-to-pole coverage. As part of our commitment to investing in innovation and shaping the future of SES, I'm excited that SES has signed a groundbreaking multi-launch agreement with Impostase to use their Helios kick-stage launcher. This game-changing partnership will allow us to shorten the time required for the selected SES satellites to reach their final orbit position, launching satellites directly from LEO to NEO or GEO in just hours instead of months, cutting transfer times, extending satellite lifespan, and accelerating service delivery to our customers. It is just another bold step in our strategy to lead through innovation and agility. At SES, our integrated multi-orbit architecture is not just a technical achievement. It is a strategic advantage that delivers advanced performance, global reach, and future-ready flexibility for our customers. We leverage full ownership economics in GEO and NEO, combined with the strategic partnerships in LEO, and our vast ground network and terminals portfolio to provide high availability, unmatched resilience, network density, and seamless interoperability across orbits. With that, I'm now delighted to hand over to our new CFO, Lisa, to take you through more detailed financial highlights.