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Hello and welcome to the SES First Quarter 2021 results. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. These can be done by pressing star 1 on your telephone keypad to register your question. I will now hand over to your host, Richard Whitening, Head of Investor Relations SES, to begin today's conference. Thank you.

Good morning everyone. Thanks for joining our investor and analyst results call for the first quarter ended 31st of March 2021. This morning's presentation was uploaded along with the press release and the subsequent release regarding the share buyback to the investor section of the FCS.com website this morning if you don't already have it. As always from me, please note the disclaimer at the back. In a moment, Steve Collar, CEO, will present the main business highlights, followed by Sandeep Jalan, CFO, to cover the financials in more detail. After some closing remarks from Steve, we'll be happy to take your questions, where we're also joined from the US by JP Hemingway, CEO of SES Networks. So on that note, I'll hand over to Steve.

Thank you very much, Richard. Good morning, everyone, and thanks for joining us this morning. I'm going to start on page three and a good start to the year with revenue and EBITDA fully in line and with the business on track to deliver on our financial outlook. In video, the value of our core neighborhoods, our market leadership in delivering premium content and strong execution on renewal is translating into improved top line performance. In networks, we've maintained revenue year on year, notable in view of the extended COVID environment. We've delivered a solid step up in our government business with an expanded set of services delivered on our unique MEO fleet. More broadly in networks, we're seeing good traction in the market and a step up in deal flow and pipeline. We continue to be laser focused on cost, cash generation, and running the business in the most efficient way. The positive impacts of Simplify and Amplify, our internal transformation program that we successfully implemented last year, is showing strongly with recurring OpEx down 7% year-on-year and is also reflected in the higher EBITDA margin versus this time last year. Leverage is also lower with half a billion of year-on-year net debt reduction on the back of strong cash generation and continued financial discipline. Very positive progress with our CBAN clearing. As you know, we will earn $1 billion through $1 billion US dollars through successful clearing of Phase 1 by the end of this year. and we're ahead of schedule with customer migrations. We're also fully on track with phase two with satellites well into their manufacturing cycle. And finally on this page, today we're announcing a share buyback program to purchase up to 100 million euros of our shares over the next few months. Our share price does not at all reflect the underlying value of the business. We've invested substantially in our next generation constellation that will launch later this year. driving top-line growth, EBITDA growth, and expanding cash flow in the coming years, augmented by substantial CBAN proceeds. This buyback program represents an attractive opportunity to deploy capital for the optimal benefit of our shareholders, and it underscores both our commitment to delivering shareholder value and our confidence in the long-term fundamentals of the business. So, turning to the key financial highlights on page four, revenue of €436 million, and in particular, adjusted EBITDA of €268 million was solidly in line with our expectations, and we are on track with the financial outlook that we presented to the market in February. €263 million delivered in Q1 in video reflects an improving trajectory, down 4.6% year-on-year versus 8% for the full year 2020, while €173 million in networks represents solid performance, in an extended COVID environment, flat year on year, and with increasing deal flow and traction as we progress through the year. I'm pleased that the structural changes that we implemented last year to reduce our footprint and our overall cost base are reflected in lower OPEX year on year and improved EBIT margin of 61.4%. This laser focus on running our business in the most efficient way while supporting the growth opportunities that we see in networks and cloud will continue. Net profit is also up 41.5% year on year. So now to speak to each of our segments in turn, starting with video on page five. And as I mentioned, a strong start to the year in video. We serve 361 million TV households, a reach that underpins the extraordinary value that we deliver to our customers across our industry-leading neighborhoods. This reach allows us to defend our value strongly in renewal discussions with our most important customers. To that end, we've concluded over 150 million euros worth of deals in the quarter, including a major multi-transponder long-term renewal with Sky. We've continued to deliver on our recent successes with the public broadcasters in extending and augmenting our services with BMT, an important public broadcaster in the rich German ecosystem that we support at our most valuable orbital location of 19.2 East. An increasingly important part of that ecosystem in which we support 18 million TV homes, almost 50% of all homes in Germany, is our unique B2C position with HD+. And I'm pleased with the progress that we're making here. The number of paying subs is growing again after a couple of years of stagnation. We've implemented a modest price increase given the expanded functionality and brand new look and feel that we've introduced. And excitingly, we'll be launching an IP version of HD Plus in the coming months, substantially expanding our addressable market and building a capability that we expect to be able to leverage elsewhere in our business. Our good start to the year and strong progress on renewals means that we've already secured 90% of our video revenue outlook. And if we assume a nominal run rate for HD Plus, that number becomes more like 95%. Shifting to networks now on page six, we've maintained revenue in line with pre-COVID levels despite the adverse impacts of the pandemic in some of the market segments that we serve and notably in some of the market segments such as aviation and cruise that provided substantial growth up to that point. Given that these segments were our fastest growing prior to the global pandemic and have faced near-term headwinds as the segments recover, and as some of our service provider customers undergo restructuring. The growth fundamentals for networks remain strong, and this is reflected well in our government business, which posted growth of 8.5% year on year on the back of additional U.S. government services on O3B, with notable wins with the U.S. Navy and other DOD departments. We announced an important contract award yesterday, a $35 million U.S. dollar deal with a major U.S. DOD combatant command for a new geo-based reachback solution connecting forward stations units in remote locations back into secure sites within Europe. Also this quarter, Lux GovSat, our affiliate operating the GovSat-1 satellite, closed an important contract for services under the umbrella of the European Defense Agency program managed by Luxembourg Defense to support the GovSatCOM requirements of the Belgian MOD. This is an important win and the first in what we hope of many projects and programs to be secured under the broad European Defense Agency program. Two further wins with European governments in GEO and MEO, the expansion of our business through our strategic partner, Marlink in Africa, and a successful demonstration of our high-throughput, low-latency MEO mobile capabilities with major European Navy program points to strong progress and good traction in global governments. FIXdata continues to perform well, and we're successfully building strategic partnerships with Tier 1 mobile operators and local providers serving rural inclusion programs. There's building interest in O2BM Power among our key Tier 1 operators, leveraging its unique capabilities to augment their fiber networks and leverage the ability to pool and share resources across a wide area, something that's unique to O3B Empower. As I mentioned, and in spite of the headwinds in our mobility sector, our fundamentals are strong given our differentiated fleet and our ability to offer multi-orbit performance and resilience. In cruise, for example, we've secured in excess of 220 million euros of commitments from four of the largest cruise brands, four of the five largest cruise brands, and to expand onto O3B Empower and our geo-hybrid solutions. We're getting closer to the launch of SES17 and O3B Empower, both programs on track to launch this year, SES17 having recently passed its important thermal vacuum testing with flying colors. We've signed almost 200 million US dollars in backlog for the program since the start of the year, will be the first to market with our second generation network, and we see good traction in the market over the course of 2021. O3B Empower is about more than just satellites, and we announced this week another key milestone with our O3B Empower strategic gateways. These investments will enhance our ability to serve customer needs and segments with high throughput per user requirements in the most flexible and scalable way, in turn driving acceleration of top line growth in networks from 2022. A number of these O3D Empower gateways will be co-located with Microsoft and our partnership with Microsoft along with our overall cloud strategy continues to gain momentum with increased revenues from delivering Azure Orbital solutions and building a strong pipeline with joint go-to-market cloud and connectivity services. And then lastly from me, a brief update on C-band on page seven. As you all know, executing on the accelerated clearing of C-band spectrum while protecting our customers and their neighborhoods create substantial value for our business and our shareholders. We have a large and dedicated team devoted to this effort, and I'm pleased to confirm that customer transitions are proceeding ahead of schedule. Starting next month, we will be into the broad deployment of filters that will protect our customers' cable feeds while clearing the low 120 megahertz for mobile carriers. Everything remains fully on track and even a little ahead for our first clearing milestone on December the 5th, 2021, which will trigger the initial $1 billion of accelerated relocation payments. Preparations for the second clearing milestone at the end of 2023 and another $3 billion of payments is also on track with the new satellites under construction for launch in the second half of next year. And as we've discussed previously, we continue to pursue further CBAN monetization both within and outside the U.S. So with that, I will hand over to Sandeep.

Thanks, Steve. Good morning, everybody. Given the continuing COVID situation and some of our markets, we are very pleased with the strong start to 2021 with our solid first quarter financial results. Our revenue and adjusted EBITDA is fully in line with our expectations. Net profit is up 42% year on year and net debt reduced over half a billion euro. As you can see on this page 9, adjusted EBITDA 268 million euro represented an improved adjusted EBITDA margin of 61.4% compared to 60.4% in the last year, quarter one, 2020. This reflected solid revenue performance combined with a reduction in overall capex by 7% year on year, which demonstrates the benefit of the Simplify and Amplify program. At the revenue level, video delivered an improved performance, down 4.6% year on year, compared with minus 8% recorded during quarter one of last year. As Steve mentioned, despite our customers right-sizing their requirements, we continue to capture value at our core neighborhoods through stable, and in some cases, increasing pricing to offset the impact from right-sizing. We also recorded higher video revenues from our progress in emerging markets, as well as adding new paying HD Plus subscribers, as well as some price increases in Germany. In networks, Our flag performance versus quarter one 2020 is evidence that even in the challenging COVID environment, our unique infrastructure delivers customer value, especially in government, where you saw a growth of 8.5% year-on-year. This is partly offsetting the impact from mobility, which not surprisingly declined by 9% year-on-year with a lag effect after a double-digit percentage growth during 2020. Our network revenues for 2021 is tracking in line with our outlook. The long-term fundamentals remain strong and we are very well placed to grow thanks to our unique assets and capabilities in network, which is well set to capture the massive growth in connectivity demand and is also set to benefit as the recovery from COVID starts to set in motion. I will now move to slide 10, which explains the net profit bridge. Adjusted net profit for the quarter stood at 75 million euros, which is an increase of 42% compared with quarter one of last year. The effect of the lower adjusted EBITDA year on year was more than offset by three main positives. Lower recurring depreciation amortization by 22 million euros, and our guidance for the year 2021 stands between 600 to 650 million euros of depreciation and amortization. We had the second main positive, which is the lower interest cost. This is a very good reduction that we are continuing to see unfolding in our P&L account, a reduction of €6 million in our interest cost from €41 million in last year to €35 million in Q1 2021. Further, please note that the interest cost will reduce by about €25 million per year. With the recent repayment of the €556 million rebond, that we fully repaid in March 2021. This leads to our annual net interest cost outlook of about 120 to 130 million euro range. And then the third main positive comes from the non-cash forex gain, which was about 9 million euros compared with the loss of about 5 million euros in the prior period. Tax remains unchanged compared to quarter one of last year, and the effective tax rate is at 10.3% for the quarter, which is within our guidance range of ETR excluding CBAN between 10 to 15%. After the adjusted net income of 75 million euros, we had a few exceptional items totaling 6 million euro on net. These comprise restructuring charge of 1 million euros, net CBAN charges of 7 million euros, and related tax benefits on these exceptional charges. Our reported Earning per share stood at 13 cents for the quarter, which is about an increase of 44% compared to last year. Turning now to the balance sheet on page 11, we continue to pay strong focus on our cash flows, thanks to which the adjusted net debt reduced by over half a billion euro, or by 13%, compared to the prior period. As shown by the chart on the right, our weighted average debt maturity profile is quite healthy at average 8.2 years, with no significant senior debt maturities coming due over the next two years. I will now move to the capex forecast on page 12, which is unchanged, having significantly reduced our capex spend by 390 million euros between 2020-2024, which we had announced with our previous full year results. Our robust cash flow will be able to support the growth investment of 2021 and 2022 with no major refinancing needs. After the growth capex peak of this year and next year for SEF17 and O3B Empower, our cash flows will not only benefit from the growing revenues and EBITDA generated by these highly differentiated assets, but also from the significantly lower level of capex needs beyond 2022. Our normalized capex needs, as you can see, in 2023 to 2025 or on average 375 million euros per year with lower growth and replacement requirements. After these significant investments of over 2.67 billion euros, we would have completed majority of our growth investments and majority of our renewals and will enter a sustained period of limited capex needs. Turning now to the financial outlook on page 13, We are on track and continue to expect 2021 group revenue to be between 1.76 billion to 1.82 billion euros, of which more than 85% has already been contracted. We are forecasting an EBITDA of 1.06 billion to 1.1 billion range for 2021, including the gains from the Simplify and Amplify program, which is continuing to ramp up to euro 40 million of recurrent annual savings in 2021 and which will continue to ramp up to further about 50 million gains by 2022. As announced by Steve, we are happy to launch today a share buyback program of up to 100 million euros to expand the shareholder returns in context of significant undervaluation of our shares, which doesn't reflect our growth outlook and the expanding cash flows and the C-band proceeds, which is due to come. And secondly, our strong balance sheet, which is And the program will start during May and we expect to complete the program over a few months. With this, I will now hand back to Steve to conclude.

Thanks very much, Sandeep. So I will round up on page 15, which provides a picture of our business in the coming years. We've kicked off 2021 well with the trends in video reflecting our expectations that we will see an improving trajectory as we reduce our exposure to U.S. wholesale and legacy services while benefiting from the strength of our core neighborhoods and leverage our ability to deliver hybrid satellite and OTT solutions to our customers. Networks remains the growth engine for SES, and our investments in our next generation constellation, OTB Empower, provides us with the highly differentiated capabilities in high margin networks verticals, particularly in maritime and government, and we'd be coming to the market ahead of other enterprise low latency solutions, and at a time where the world is emerging from COVID, giving us the opportunity to capture the significant growth in data and connectivity. The entry into service of SES17 and O2B Empower will coincide with our investment peak, so cash flows from expanding top line and EBITDA will be augmented by meaningfully lower capex from 2023 onwards, And with our fleet largely refreshed and substantial growth investment behind us, we'll have substantially lower CapEx needs for the second half of the decade. And all of this is further reinforced with the $4 billion in accelerated clearing proceeds that we will realize from the FCC's CBAN clearing process. We believe that the strong position that we outline here is not at all reflected in the current valuation of our business, And our announcement today of a new share buyback program represents an attractive opportunity to deploy capital for the benefit of shareholders and reflects the confidence that we have in our growth and the long-term fundamentals of the business. And so to conclude, we'll continue our laser focus on execution and on delivering on both our outlook for the year and the exciting growth plans that we have for the future and the value creation that SES is well positioned to capture. And with that, We are open for your questions.

As a reminder, if you would like to ask a question or make a contribution, please press star one. Our first question comes from the line of Sami Kassab from Exxon BNP. Please go ahead.

Thank you, and good morning, gentlemen. I have three questions to start with, please, Steve. The first one is on the improvement in video. You're still guiding for a minus nine to minus six percent decline for the full year, despite four and a half in the first quarter. So why would the video trends deteriorate in coming quarters? Or are you being very conservative in terms of the video outlook for 2021? Secondly, Mio Orbit offers a somewhat higher latency than Leo, as we all know. But can you comment on whether the 100 millisecond difference in latency does indeed have any commercial relevance at all In other words, what are the applications that can run on LEO but would struggle to work on LEO, if any, and how will you address the issue? And lastly, Empower satellites live longer than LEO satellites. Your constellation costs much less than competitors. In my own opinion, I think bandwidth economics looks much better than LEO. So in that context, can you elaborate on your pricing policies? and on how Empower pricing or total cost of ownership compare to current Leo pricing. Thank you, Steve.

Thanks, Sami. So look, on video, we've been sort of suggesting that we see the curve in our video business flattening, and that's reflected in our Q1 results. no change in guidance no change in outlook as far as video is concerned uh we gave a range obviously at the start of the year and continue to be you know comfortably within that range i would say as far as video is concerned uh and we'll obviously update as we go through the year on mio mio orbit uh look completely agree with sort of the the inference in the question we We picked MEO for a very good reason, because we think it is exactly the sweet spot between delivering low latency, but also far enough away from the earth for us to deliver all of the really key competitive benefits that we can bring with O3B Empower, which is about being able to flexibly assign very large amounts of bandwidth to high demand and highly valuable users, and that's something that we're laser focused on. So we think that the bandwidth economics, but more importantly, the products and services that we can deliver from Mio are meaningfully better, I would say, than Leo. And to sort of try and take your third question as well, What I would say is we don't price based upon sort of, you know, cost. We price on value and we position our products based on value into the market. And that's where we feel very, very comfortable with the position with O3V Empower. As I said, it's coming to the market at a very good time as the market sort of emerges from COVID. I think we will be unique in the market with the kind of capabilities that we have. And we see... strong demand coming from, you know, users who are not super price sensitive and are actually more interested in the kind of quality that we can deliver, the kind of service that we can deliver. And that's the sort of the ground on which, if you like, we will sort of position O2V Empower into the market. And we're seeing strong traction on that basis.

And still, is there a way to compare one-web prices into the telco industry, for instance, to empower all 3B prices?

Yeah, again, I think, you know, we obviously know the one-web constellation well, as we know all of the other constellations. I think they will sort of operate in a in sort of adjacent and sort of lower market segments than we're targeting, we feel like we have a very, very strong position with a large market that we can serve with O2B Empower.

Thank you, Steve.

The next question comes from the line of Michael Bishop from Goldman Sachs. Please go ahead.

Thanks very much. Just three questions as well, please. So the first one is, the buyback I think you're quite clear in the presentation that you know where the shares are and your confidence in you know future leverage of the business the growth and the CBAM proceeds have framed why you're doing the buyback at these levels with the with the shares that are close to six euros but I was just wondering behind that whether you've actually got a more formal framework now as as to how you and the board think about buybacks because Clearly, if you're going to complete this buyback, as Sandeep said, over the next three months, you then still don't have very high leverage and you've got the $1 billion of seed man proceeds coming in. So any sort of background on whether you've got a more formal framework will be really interesting. The second question is just to, again, pick up on video. It seemed like there was quite a lot of moving parts in terms of renewals and new business. So I was wondering if you could give us any more detail on that. You mentioned, I think, that some pricing actually went up. but whether you could give us any insight on that. And in particular, the sky contracts would be great. And a final quick question would just be, you know, what's the latest from your mobility customers with regards to sort of, you know, the impact from COVID and whether there's any sort of green shoots you're seeing there. Thanks.

Great. I think you're going to hit all three of us. So Sanip's going to take the first, I'll take the second and JP will take the third.

Hi, Michael. So, look, this share buy back, we have been pretty clear. This is 100 million by BAC. It's a very decent size. It's about 3.5% of our market cap. In terms of the framework, how we think about it, our financial policy is very, very clear, right? We maintain a base dividend, which is a minimum base dividend of 40 cents. So that is given. And then there is any surplus cash that we try and deploy and discuss with the board to deploy it in the best interest of shareholders. And taking a look at our current investments, over 2021 and 2022, as well as very strong balance sheet, as well as the C-band proceeds just around the corner. And given the significant undervaluation of our shares, we really believe that it is the best deployment of this 100 million euros. And we will continue to look at this framework, which guides us to manage between our growth and capex needs on one hand, but also continuing to maintain a strong balance sheet consistent with the investment-grade matrix, and make sure that we continue to deploy our capital in the best interest of shareholders, and that's what we are doing, and that's what we'll continue to examine within our financial policy framework.

Yeah, and I think on the video side, Michael, yeah, I mean, I think predominantly driven by good solid performance around renewals, so we've captured a lot of the renewals that we need to for 2021, so that reflects in the fact that, as I said, 90% of our revenue for 2021 is already secured and effectively 95% if you include a sort of a nominal run rate for HD+. So we feel good about that. And I think, you know, it reflects solid performance across the board. A couple of new wins, an important renewal with Sky, 90 million in additional contract value that came as a result of that. And when we add that to the existing business that we have with Sky, that extends them out into the And obviously that also comes on the back of an important renewal with Canal Plus that we closed at the back end of last year. So I think, you know, the momentum that we had at the back end of last year with renewals and then sort of carrying forward into a good three months on the video side is what shows this trend. Like I say, no change in our outlook for the year, but we feel very solidly within guidance for video. And then perhaps hand to JP for the third question.

Sure. Good morning, Michael. And in terms of the COVID impacts, I think it's fair to say that COVID hits all of our segments to some degree, but we're really pleased with the resilience and performance of fixed data and government as the results have shown here, but clearly they focused on the critical projects and we've been very successful in winning those critical projects, which is fantastic. But obviously we talked before about cruise and aero being the two segments that were very visibly impacted by COVID. But as you said before, we've had fixed long-term contracts with both of those segments, but obviously we've tried to be flexible. Try to be flexible as those customers have suffered their own end customer business. And where we've been flexible, we've generally managed to extend our contracts with those customers for the future. And certainly in cruise, as we discussed, we've extended them well into O3BN Power, which is fantastic for us and also their own innovation for the future. Now, we're watching those segments very carefully. We obviously work very closely with those customers. We don't see a miraculous recovery starting this year, but we are seeing, you know, good Return to sale, both in Europe, Asia, and good progress for the CDC in cruise. So we're watching that carefully. And in aero, probably starting to see more flights, but also see that recovering well into next year. The good news is we've got really strong long-term fundamentals in those segments. And the new business we secured pre-COVID that was yet to get to revenues during this period will drive future growth as that demand recovers.

Great, thanks, everyone. The next question comes from the line of Nick Dempsey from Barclays. Please go ahead.

Yeah, good morning, guys. Can you hear me? We can, Nick. Excellent. I've got three questions as well. So first of all, just on the fixed data, you mentioned some issues in the Pacific. Is this competition with subsea cables? And is that something we should worry about as a headwind for a while? And while I'm on fixed data, minus 1% organic in Q1, what could make that year-on-year run rate improve through the rest of 2021? And then, same question, you've given your opinion on potential consolidation in the sector on previous calls. Now that all of the other FSS players except Intel have been investing in LEO, and you've shown your views on the economics of LEO, Does that make it less likely that you could participate in consolidation in this market? And the third question, your backlog for Empower and SES17, that's not stepped up since February. Is there a seasonal element to when you're likely to start to add new contracts, or can we expect that number to go higher by the time we reach the half year?

Thanks, Nick. JP, why don't you jump in on one?

Sure, yeah. Thanks, Nick. So fixed 80, yes. In terms of the down 1%, let's put that in context. It's a fraction of a million euros, right? So it really is sort of flat year on year, which given the year we've been through, we actually feel pretty positive about and was actually greater than our expectations in our plans. So we're feeling pretty good about that. What do we see for the rest of the year? We have got really good progress with the major tier one mobile operators around the world. and some of these rural inclusion projects that have actually become more important as a result of COVID for needing connectivity out into the most rural locations for health and education. Now we're seeing really good progress in that. So we see the timing of that going through the year and absolutely would underpin the guidance we have between two and 6% for the overall networks growth period. Specifically on the Pacific region, yes. We've obviously anticipated submarine cables coming into some of the islands where we were the only connectivity medium at the time. We've long planned for that being a point where those cables come in and we tend to shift to a more second resilience mechanism to back up those cables because they're not always highly available and take a long time to fix when they have failures. So something we have planned for. And so with Empower, we've got a much greater capability to connect to the outer islands, not just the main islands, And there's a number of programs that have got ongoing there. So we expect some growth from that sector in the future.

Nick, I'll take the second question, which is sort of around consolidation, but also kind of our view on Leo. So the first thing I'd say is we have absolute conviction around multi-orbit rather than an aversion to Leo. we have sort of taken an approach that says we intend to combine the investments that we're making in GEO and MEO and use the full power of that network in an integrated way. And we think that that also gives us advantages when we think about looking at ways that we can improve return on invested capital across the industry without necessarily relying on M&A. We think that there's ways that we can use The integration that we're building with our Arc system that will allow us to sort of move resources across our MEO network and our GEO network, those networks will ultimately be interoperable, and that means that we can also interoperate with others. I think with respect to Leo, we certainly don't say that Leo isn't a valid place to serve customers from, but the economics for a pure Leo network are really challenging, and I think our view on that hasn't changed. And with respect to consolidation, again, I think probably no real change in our position, which is that I think the overall industry will benefit from consolidation. I think, again, return on invested capital across the industry will become challenged, and I think that probably means that consolidation is needed, likely, what have you. But we will continue to be financially disciplined, as you would expect, operate in the best interests of SES, look at opportunities that are there, but remain absolutely committed to delivering on our promise to our shareholders, which is probably, Nick, what you'd expect me to say. And then your third question was on backlog for OTB Empower and FES17. Look, I mean, it feels like yesterday that we had this sort of conversation, so I think a relatively short time between our end-of-year results and Q1 results. I wouldn't read too much into that. We've got a strong pipeline. We see really good opportunity. We've closed $200 million in backlog since the beginning of the year, which feels like good progress, and The most exciting thing is the launches are on schedule, which in this environment is not obvious. And so SES 17 and O2B Empower both slated to go off this year and sort of excitement building, I think, both within the company, but also externally in the customer community for the services that we're going to bring on the back of those assets in 2022.

Thanks, guys. Thanks, Nick.

The next question comes from the line of Alexandre Peter de Societe Generale. Please go ahead.

Good morning, and thank you all for taking my questions. I'll have to continue with the tradition set now for three questions. So the first one is just kind of a maintenance one. On HD+, price increase, could you quantify that and what the time is? Presumably that's Q2. But if you could give us an order of magnitude, that would be okay. Then, secondly, can you give us a view of your long-term average CapEx-to-Sales ratio that you're targeting in your model? And that includes the pieces that you see now with O3B and power launches for your close to 50% CapEx-to-Sales in 2022, and then that drops straight to 12% the following year as you complete that constellation. So I'm just wondering, is 25% a good range for your over-the-cycle CapEx-to-Sales intensity? And then just finally, how much of the EBITDA margin strength should we extrapolate into the remainder of the year? I mean, I know we have your guidance, so that's something to anchor our estimates around. But would you say that your EBITDA is now structurally firming or are we just having a flat out of it from here? Thanks.

Great. I got your first question on HD+. The second one was a little unclear because I was a bit annoyed, so we might ask you to repeat that, and then Sandy will take the third. So on HD+, it was a relatively modest price increase. It was sort of high single digits in terms of percentage. But nevertheless, you know, important, right, in terms of the step up. And the fact that we've seen good subscriber traction both sort of before, during, and after that, you know, points to the fact that sort of the B2C customers that we have in the market more broadly sees real value in the product that we're bringing to the market. We've done a lot of work on HD Plus over the last year or so. about 50 of all tvs that are now sold in germany include the hd plus operator app which means that customers no longer need a set-top box or a module they can literally just buy a new tv and go straight to the the hd plus environment and that environment has been sort of meaningfully upgraded so we provide a lot more functionality a completely different look and feel and that kind of i think uh is is generating good traction with with customers in the market and so

you know we're seeing subscriber growth and a little bit more arpu from from those customers uh in what is a very important market for us sandy handing to you for the third question and then i'm not sure if you caught the second yeah yeah so uh on the victim margin as you see that we have made very good uh victim margin in quarter one we are at 61 and a half percent uh currently we are trading very comfortably towards the high range and we are continuing to focus on execution First of all, on the revenue, as you can see from our performance in video as well as the network during quarter one. And secondly, also on our OPEX, where we continue to make very good progress on delivering the gains from Simplify and Amplify program that continues to ramp up. And this basically shows that we are on a good track so far as our EBITDA margin is concerned. And I can also comment a little bit about average cap items. In context of this, as we told you earlier, on our CapEx, our CapEx passed this investment peak in 21, 2022. It continues to go down meaningfully. Over 23 to 25, we expect about 375 million euros. But by 2025, we have taken care of all our major growth investments as well as major renewals. So long-term average capex, we expect to be sustainably lower levels. Thanks.

Can you ask a second question?

I was just wondering if you could give us a percentage target range where you expect to be longer term, including the peaks that you see because of the constellation launches with O3B. So is 25% capacity sales good, or is it 30% or is it 20%?

I mean, I think so. The CapEx profile that we show on page 12 of the presentation includes all of the launches and all of the O3B Empower investments. So at the end of this period in 2025, we'll have a brand new 11 satellite constellation for O3B Empower. We will have meaningfully refreshed you know, our core video neighborhood. And if we look beyond 2025, you know, our view of CapEx is lower than the average 375 million that we show on slide 12. So, you know, the second half of the decade, I would say, given that we have a brand new constellation, looks meaningfully lower, not providing guidance at this stage, but the second half of the decade looks like a low CapEx environment for us.

Thanks.

The next question comes from the line from Jeffrey. Please go ahead.

Thank you. My first question was on the Leo question again and obviously the recent use of UTOSAT taking a minority stake. And one of the things that stood out for me was the idea that in the cloud era, latency becomes strategic or similar such language. And obviously, SES has been a first mover under that thematic umbrella. So I'm interested, Steve, to hear how you protect that first mover advantage. Second question, just to frame the decision to buy back shares a bit better or a bit more. It'd be interesting to hear the type of growth investments that you could have made with that money at this point in time. And then lastly, and it's a very specific question, but picking up on the Global Eagle and UTOLSAT announcement from the other day, it's very curious. They are your major partner, and North America is where you provide them a huge amount of KU. And there's obviously been volume stepped down the past year to reflect the impact of the pandemic. I'm just curious why Global Eagle is buying KU from UTOSAT at this point in time. I'm inclined to think it's because the satellite's on an inclined orbit, but you tell me. Thank you.

Yeah, thanks, Giles. Look, I mean, so is latency strategic? 100%. And it's something that we've been, you know, we've been, I would say, leading the industry in that area. It was an unpopular view, I would say, 10 years ago, when we started on this journey, it's now a popular view. And I think that reflects the fact that it's true. And sort of, latency was a challenge for the satellite industry historically, and I think the industry is now addressing that challenge, and that's very, very positive. That said, what you need to do is find that sweet spot where you can deliver the right level of performance, but also the right sort of level of profitability of the constellation, affordability of the constellation, and that's where we feel like MEO is really, really advantageous, And then how do we capture the cloud opportunity? I think it's doing exactly what we're doing with, for example, our partnership with Microsoft and with Azure. You know, that is going really well. We have very strong alignment with Azure, with Azure Orbital, and with Microsoft more broadly. And I think they see a real value in... In some of the market verticals that we're able to serve, I would say, somewhat uniquely by having the ability to deploy a lot more bandwidth from MEO than is typical from LEO networks. With LEO networks, you tend to be limited by the individual performance of the individual satellite, and that means that you typically can't provide a lot of concentrated supply or a lot of concentrated service. So, for example, cruise, where you've got kind of floating cities, it's why we've become... by a distance the number one provider in cruise with all of the large cruise lines, but also a number of government applications, a number of other applications where our ability to move very substantial amounts of bandwidth around the system and to do it flexibly, which is something that comes uniquely from Mio, is really, really attractive. So I think, Giles, the answer is yes, latency is absolutely strategic. Yes, cloud, absolutely strategic. And I think we're doing all the right things by leveraging the the very differentiated infrastructure that we're building, but not only that, partnering in the right way with the broader ecosystem, something that we've been, again, banging on about and talking about for some time, sort of taking satellite mainstream and driving satellite into the broader ecosystems of telco and cloud is something that we think is important and that we will continue to do. On the buyback, look, I mean, I think, you know, we've said it all in the presentation and we've said it all in sort of the voiceover. We see this as a, you know, an interesting opportunity to create shareholder value and with the value of the business where it is, it's a very good opportunity. I would say in terms of growth, we are investing very substantially in growth, right? If you look at OTP Empower and SES17. And even just over the course of the next couple of years, we're investing $1.5 billion in CapEx in order to bring this fantastic second-generation state-of-the-art network to life on our own balance sheet. So that reflects a very significant commitment to growth. And the fact that we're able to grow, remain investment-grade, invest very substantially in our network, and indeed sort of launch this buyback, I think reflects the financial strength and the strength overall of the business. And then your third question was on Global Eagle. JP, do you want to take that?

Yes, absolutely, Stephen. Good morning, Giles. So as part of Global Eagle coming out of Chapter 11, obviously, they've had the ability to restructure their contracts and their situations. And they remain a very strategic customer of ours and a very strategic partner as we go forward. But obviously, as part of that restructuring, they're able to look at what they needed during this COVID impacted times and analyze the price performance of any assets they would like to take, which, as you say, they've chosen to take something from Neutralset. I won't comment much more on that, but obviously they've been matching what they think their needs are to the price performance they need to supply in the current COVID-impacted environment.

Thank you, guys. Steve, if I can, just a follow-up. Why not take that $100 million and in this era of huge opportunity and the sector being much more, I suppose, radical or ambitious, why not take it and use that $100 million to lock in Google as a key cloud partner or maybe not Amazon because they're probably going to go a different direction, but why not go for it?

I think, Giles, I think we are going for it. I don't think you should sort of read into the fact that we've launched a share buyback, meaning that we're not full in on growth and delivering on the promise that we have with the network. I think, like I kind of answered, I think it's It speaks to the strength of the business that we're able to invest very substantial capex in growth in bringing this brand-new constellation that we really see has strong competitive advantage, remain investment-grade and be very, very lasered around that, but also deliver value to our shareholders, firstly through the dividend that we just recently paid and now through the share buyback program. So it's a balanced approach, I would say, that can deliver value growth for us in the future, and also shareholder value today. Thank you very much.

The next question comes from the line of Penn Lions from Credit Suisse. Please go ahead.

Hi, thanks for taking my questions. I'd also have three. First one is if there is any update on the issue regarding claims against Intelsat, that'd be really helpful. The second one was regarding CBAN opportunities. I was just wondering if you also saw any risks around that. You were seeing a competitor of yours facing problems in the Netherlands. I was just wondering if there are any hurdles to possible further monetization. And lastly, a quick one. I'm not sure if I missed it, but would you be able to quantify the COVID impact to the OPEX or within the OPEX savings? That would also be quite helpful.

Thank you. Very good. So I think the first question was around Intelsat litigation. So I would say no real update from what we've said previously, which is we intend to hold Intelsat fully accountable for the agreement that they had with us. I think the case is proceeding and it will be heard before Intelsat emerges from their Chapter 11 restructuring. So that's a positive thing. So we are sort of the schedule works out well from that standpoint. And I believe it's sort of June-July timeframe where we expect that to kind of resolve itself. C-band didn't get the reference to the Netherlands, so you might need to expand on that a little bit. But what I would say is no risk that we see in the C-band clearing process is going very well. You know, we have all the filters in-house that we need to in order to secure the phase one clearing. The customer clearing is ahead of schedule. We'll have a busy time of it over the summer deploying filters, but we really feel like that program is going as well as it can, and similarly on the phase two. So there may be a follow-up on that because I'm not sure I got the question, but the bottom line is CBAN clearing, we see no risk there, and really the program is going as well as we could have expected it to. And Sonique, do you want to take the COVID impact?

Yeah, so in terms of the COVID impact, as we had announced last year as well, over this COVID mitigation plan, last year we had targeted about 50 million euro of savings that we fully saw as an outcome in our P&L account. Clearly, this was partly offset by certain bad debts. So we were in a range around 30, 35 million euros of net savings, including certain one-off impacts, right, including from bonus cuts, et cetera, that we had done. Now, as the world starts to recover, so we see this year that these COVID-related savings are starting to go down quite a lot. But we are still having some savings, but they are in low single-digit millions on a quarterly basis. But the good thing is that while some of those costs start to come back, we are starting to see meaningful impacts from the Simplify and Amplify program, where the savings run rate is ramping up. very decently around 40 million euro savings for this year and 50 million for next year. So we are fully on course so far as our OPEX is concerned. We are laser focused on every cent of cost that we spend on the business and be disciplined about it.

Great. That's really helpful. Just on the Netherlands point, in Malzahar, I've been... we allocated spectrum essentially to make way for the 5G spectrum. So I just wonder if you saw any risks around that or if that would impact any of your services.

We've been tracking that. We don't see any direct read across or any impact from our standpoint.

Great. Thank you very much. Thank you.

The next question comes from the line of Ranjit Roshan from Deutsche Bank. Please go ahead.

Great. Good morning. Thanks for the question. Just two very quick follow-ups from me, please. Firstly, on video, you talk about the 90% of the revenue Outlook contracted for this year. Is it possible to get an update on the, where we stand on the Ecostar and Quetz set, and if that has filtered into that 90%, or is that more going to hit FY22, whatever the outcome there? And secondly, Sandy, thanks for providing the simplify and amplify impacts this year. Next year, is it possible to just get a breakdown of where those are coming from? Because I think previously you've talked about potentially, you know, restructuring certain areas of the business, footprint adjustments, and I know you've close certain officers, but a bit more detail there would be very helpful.

Thank you. want to avoid getting too specific around sort of individual customers and arrangements. I would say, you know, we've spoken about U.S. wholesale and kind of what we expect to happen there. The good news is with Ketsap, we continue to support an important customer in Mexico, in Dish Mexico, and that's something that we expect to continue going forward. And so, you know, what I would say is, fully factored into our outlook for 2021 and 2022. Obviously, we're not providing guidance, but we have a clear idea, I would say, in terms of what we expect to happen with Ketsat, and importantly, the customer that we support on Ketsat going forward.

Yeah, so in terms of the Simplify and Amplify program, as we had announced last year, it is focusing very heavily into our organization and our offices, integration thereof, and a complete restructuring. I mean, unlike ever before in SES history of 35 years, it was a program of massive magnitude impacting almost 20% of our people around the world. And it is creating more concentrated offices, more agile teams coming together and creating this pool of savings. We have taken a look not only at our internal manpower, but also our external manpower, our contractors, and gone through every single line, and that is where we continue to see now very good progress starting to unfold in our quarterly results and ramping up toward this 40 and 50 million euros run rate savings that we are very, very confident about in fully delivering.

Great. That's super helpful. Thank you.

The final question comes from the line of Patrick Wellington from Morgan Stanley. Please go ahead.

Oh, morning, everybody. First question on video. Actually, you go back to Sammy's question originally. Do you think this quarterly performance is an expression of the flattening of the curve that you've talked about in the video organic revenue decline? As I remember from the full year, you're looking at three things to flatten that curve. The U.S., now less than 10% of video turnover, the decline or the effect of the decline there falling away, the right-sizing effects in Europe being complete, and your own retirement of those low-margin distribution revenues being over. So perhaps you could frame the better video performance in the context of those three things, U.S., right-sizing and the distribution stuff. Secondly, on networks, is it still your feeling, as it was at the full year, I think that cruise will begin to normalize in the middle of this year, but Aero won't normalize until next year. Is that still your feeling about cruise, that that starts to come back this year? And then thirdly, on O3BM power and SES17, By the time it launches, what would be a good backlog number in your view?

Very good, Patrick. Thank you for those questions. Yeah, video, I mean, I think you're exactly right that we see sort of the trajectory over a period of time flattening, and I would say the main drivers are the ones that you highlight and that we've talked about previously. We've had... you know, exposure to U.S. wholesale, and given the market there, that's something that, you know, we knew and understood would sort of reduce. And as we've also talked about, the C-band neighborhoods in the U.S. will sort of somewhat shrink, and that has been not unhelpful, I would say, in the context of the C-band clearing. But actually, we see some good stabilization there. We've secured some good renewals during the course of sort of early 2021. And I would say probably, you know, in a couple of cases, a little bit unexpected. So that's been helpful and probably, you know, gives us a little bit of momentum in video in the early part of 2021, explains a little bit, you know, the performance that we see there. So that's very positive. Yeah, and right-sizing, absolutely. This is about core DTH customers balancing what they carry over satellite versus what they carry terrestrially. We feel like we're really on a good side of the curve. Most of our neighborhoods are already MPEG-4 or HEVC. Our customers already have hybrid solutions. And so, you know, we feel like we're a good way through that process. And again, the fact that we see, you know, the curve flattening is sort of reflects that. And similarly, yeah, we've done a lot of hard work around our services to make sure that we're really delivering services in a profitable way. And we've sort of refocused what we do towards our largest and most strategic customers. So, for example, last year we signed and we've just implemented and we're now operating Playout and services for the BBC internationally. That's a very important customer service. But we've also reorientated towards the cloud. And in the cloud, we can really deliver a completely different level of services to our customers, a lot more flexibility, but also do it with improved margins. We've reduced our exposure to the, I would say, legacy on-premise, low-margin services that were part of our portfolio. We still have, you know, that work isn't completely finished, so we will continue that over the course of 2021. But I have to say already the dent that we've made there has made a difference to the profitability that we have within our video services industry. team, and that focus will continue. And like I say, I'm pretty optimistic not only that we will shift the profitability of those services, but actually we're also developing some very interesting capabilities in the cloud and sort of more to come there. And when you think about that in combination with HD Plus and the experience we have in B2C as well, I think we've got some unique aspects to our video business that I think we can leverage more as we go forward. On the network side, maybe JP, you can give the voiceover.

Yes, absolutely. So your question was around mid-year for Cruise and next year for Aero. So maybe I'll start by reiterating that our contracts are generally fixed in nature. So therefore, the relief that we've given is more around cash relief in the short term. And as I said, in general, we've managed to extend our partnerships by being a good partner through this challenging period. But yeah, cruise, some of the cruise ships that we serve are sailing now. They're called these cruise to nowhere. So they're contained within certain regions. And I talked about Europe and Asia. And the whole industry is watching carefully the latest CDC guidance and looking to see, you know, July onwards for those kind of US-centric cruises to start. And we're obviously working fairly carefully with that. But as we said before, it's the new business that really suffered in both cruise and aero. And we don't expect an immediate uptick for that. We're watching when the new vessels are set to sail. And that situation is fairly fluid. So we're looking for that new business to really translate into revenues through the second part of this year, but upwards into 2022. And on Aero, despite passenger numbers increasing and indeed those passengers consuming more connectivity than before, it was all about new business. And we don't expect that much new business to suddenly ramp up in the back end of this year more certainly in 2022 and beyond. So in essence, yes, your suppositions were fairly close.

And Patrick, on sort of the backlog of OPBN, Empower and SES17. So look, important that we continue to provide you guys with visibility of how we're doing there. I think, you know, 200 million signed. already in 2021 represents a good performance, something that we have good traction on as well. I would say we've got, as we look at the pipeline, there are a number of opportunities in there that look really good and where we feel like we have a strong competitive position, particularly, as I said, given that I think we're going to be largely on our own with O2B Empower in the market with the kind of capabilities that we can deliver. So I think we feel like we've got a very strong right to win in significant parts of the network verticals that we're serving. Not going to give, you know, sort of guidance on what we think good numbers might be at either time of launch or time of in-service. I think it's really about incrementally signing more and more business as we approach the launch and we approach the in-service dates. And that's something that I'm very optimistic that we will continue to do given the pipeline that we see.

Steve, that's great. And quickly, while I have you, you talked also about the opportunities for C-band in other markets briefly. I think you've talked about Canada, Brazil, maybe two to three other markets. Is there any update to give there?

Yeah, I think that, you know, the processes are moving forward. I mean, these things rarely go as quickly as you would like. Right. And that was definitely our experience with the U.S., which was probably a three year process. I think others won't take that long, but it's not something that necessarily we expect to see progress on a quarterly basis. So I think the next one is likely to be Canada. That's the one that... you know, we're spending a good amount of time on and sort of the government are thinking and the regulator thinking seriously about what to do there. Brazil is moving. I think Brazil probably won't be a big, let's say, CBAN monetization opportunity, but I think it may well be an opportunity for us to capture... sort of more of the market in Brazil which would be equally interesting for us so yeah I think those are the two shorter term but short term is a bit of a movable feast in the context of this topic you know the timeline is difficult to control but I do think that there are good opportunities in Canada and Brazil and I think you know more opportunities in the US as well as we speak to and work with the carriers who have been successful in the in the record-breaking auction that was completed in the early part of the year.

That's great. Thanks.

Thanks, Patrick.

That's the end of the Q&A session. I will now hand over to your hosts.

Very good. Listen, thanks very much for joining us as usual. Happy with the start that we've made to the year, and we will focus hard on execution and driving the business forward throughout the rest of 2021. So I look forward to speaking to you all at the end of the first half. And with that, have a great day.

Thank you for joining today's call. You may now disconnect. Hosts, please stay on the line and await further instructions.