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Ses Sa Glbl Fid Dep Shs
2/27/2023
Hello and welcome to the SCS Full Year 2022 Results Conference Call. My name is Priscilla and I'll be your coordinator for today's event. Please note this call is being recorded. Your lines will be on listen-only mode and if you require any assistance, please press star zero. I will now hand it over to your host, Mr. Richard Whiting, the Head of Investors Relations, to begin today's conference. Please go ahead, sir.
Thanks. Good morning, everyone. Thanks for joining this analyst presentation call for our full year 2022 results. This morning's presentation was uploaded along with the press release to the investor section at SDS.com if you do not already have it. As always, please note the disclaimer at the back of the document. In a moment, Steve Collar, our CEO, will present the main business highlights, followed by Sandeep Jalan, our CFO, to cover the financials in more detail. After some closing remarks from Steve, we will take your questions.
With that, let me hand over to Steve. Thanks, Richard. Good morning, everyone, and I'll walk you through the highlights of what's been another busy and successful year for SES, starting on page three of the presentation. So we delivered a solid set of results for the year, and we've executed strongly across the business on all fronts. We secured $1 billion in new customer deals, completed the important acquisition of DRS GES in record time, brought SES-17 into service, launched the first two O2B Empower satellites, secured $170 million in incremental C-band clearing payments from Verizon, and launched the satellites needed to complete the Phase 2 C-band clearing. Revenue for the year of €1.944 billion and adjusted EBITDA of €1.105 billion are comfortably within the financial outlook that we provided last February. Networks now represents 50% of revenue and grew by 2% year-on-year, with cruise and aviation being the standout performers, both of which rebounded strongly post-COVID. Our video neighborhoods are the bedrock on which we build our global business, with 2022 a good year for renewals, most notably with Sky. Consolidation is a topic in the industry these days, and I was really pleased with the acquisition of DRS Global Enterprise Solutions, completed during the year. This was a business that we'd identified as a great fit for SES, proactively targeted, and closed within five months. Serving some of the most demanding end users in the DoD, GES is now fully combined with our government business under the new banner, SES Space and Defense, a best-in-class, full-service government system integrator, just as we bring O3VM Power to the market. Speaking of O2D Empower, we have positive commercial momentum with SES and O2D Empower, and combined gross backlog now stands at over $1 billion for the first time. In 2022, we closed a landmark partnership with Reliance Jio, signed five of the top six cruise operators onto O2D Empower, anchored our partnership with Grand Station as a service, and announced a major deal with Marlink supporting their growing enterprise business. This was underscored as recently as last week with the announcement that Marling will drive digital transformation across French Liana and gateways on both FES17 and O3BM power in a 15-year deal that will deliver 4G and 5G services across the region. Significantly, last week I joined Luxembourg's Minister of Defence for the announcement of the NEO Global Services Programme, which following parliamentary approval will commit €195 million to for the acquisition of unique capabilities and services on OVBM power to support Luxembourg and its NATO partners, placing OVBM power at the heart of defense and security across Europe. More on this to follow. And lastly, an important year for our U.S. CBAN program began with us receiving the balance of the $977 million accelerated relocation payments for Phase I clearing, We then concluded the agreement with Verizon for additional clearing and completed all of that work in the year to earn a further $170 million. And finally, we launched three new C-band satellites that are now fully operational and completed a substantial proportion of the required filtering. The project is meaningfully de-risked with $3 billion in accelerated relocation payments to earn before year end. So turning to page four now and more detail on the network's performance, As I mentioned, mobility repended in 2022 with 13% growth. Cruise was ahead 20% year-on-year with a fifth major brand signed and expanded services with MSC's Explorer Journeys. Aviation also performed strongly following the introduction of SES17 and the successful transition of the Thales In-Flight Aviation Network to support Spirit Airlines. Our fixed-data business was also supported well by the introduction of SES17. Sales momentum was good throughout the year, with 17 new contracts signed, the majority supporting rural connectivity programs, including RSAT, who contracted for all of the available capacity in Argentina, as well as Access Networks in Claro, Brazil. Other fixed data deals in the year included Digicel Pacific, Marlink, Microsoft, SSI Canada, and Vodafone Cook Islands, who were our first O3D customer a decade ago, and have now extended onto O2BM power. There was limited new business available in U.S. government in 2022, but we had a good year in securing important long-term renewals, including the U.S. Army Trojan program and the follow-on U.S. Navy CSSC-2 program with Parva in Marsat. DRS-GES contributed 95 million euros in revenue in the five months that they were in the business, And now combined as SES base and defense, we expect to exceed the promised 25 million US dollars in annualized medium term synergies, including the migration of customers to SES fleet capacity. And speaking of government, I want to spend a bit of time this morning on page five, looking at secure sovereign space, an area that I've been speaking about for a while and can now point to a number of strategic initiatives that underscore the importance of sovereign space to governments, our credentials as SES, and the strategic focus that we've had on this segment for some time now. So governments increasingly appreciate the importance of space as a strategic environment from which to deliver services, secure communications, Earth observations, space situational awareness, 5G, data relay, positioning, and more. Global capability leveraging the right orbits for the right service is out of reach for most governments, and they're increasingly leveraging trusted commercial operators with access to spectrum, differentiated space capabilities, and system integrator skill sets to deliver multi-mission services. And with that in mind, Luxembourg's announcement establishing the Mio Global Services Program was really significant. This program will authorize the acquisition of O2BM power services by Luxembourg, valued at €195 million over 10 years, in the areas of defense, security, disaster recovery, supporting Luxembourg's commitment to NATO and establishing a secure capability for its NATO allies. Importantly, the NGS program is also the anchor for the framework agreement signed between Luxembourg and the U.S. late last year. The Global Commercially Contracted Satellite Communication Support Partnership, established under the NATO Support and Procurement Agency. This establishes O3D Empower as not only the workforce for NATO in the protection of Europe and its borders, but also as the strategic medium Earth orbit layer in the U.S. DoD space infrastructure. And to highlight the importance of medium Earth orbit, we signed an innovative agreement with NASA, showcasing a new application, Data Relay from LEO. With OTBM Power, we have a practically unlimited number of digital beams that we can use to relay data, not only from Earth, but also from space. and we see significant potential in the use of OQB Empower to move our customers' data around the network in a secure way. And as further evidence of governments leveraging commercial capabilities and integrating with their own Millsatcom programs, Babcock International, supported by both SES and our GovSat subsidiary, were recently awarded a £400 million six-year contract to operate Skynet for the UK Ministry of Defence. The service delivery wrap will encompass the operation of the UK's Skynet satellites and ground stations, as well as delivering innovative future services to support the UK's deployed forces. We joined the European Commission, the European Space Agency, and Luxembourg government in announcing our first low-Earth orbit satellite, Eagle 1. SES and Luxembourg are leading the way in developing quantum key distribution from space, an application specifically called out in the Iris Squared project. And Iris Squared is now approved and aims to establish a sovereign multi-orbit constellation supporting the needs of Europe and its citizens for the coming decades. The European Parliament has approved the investment of 2.4 billion euros in the project's first phase through 2027. And SES is uniquely positioned as the European operator with multi-orbit credentials to partner with the Commission to deliver on the project's ambitious goals. So now switching gears and video on page six and performance fully in line with our expectation, revenues were lower by 5.5% year-on-year, including the termination payment from Nordic Entertainment booked in Q1, which kept us whole for 2022, while the impact at the end of our U.S. wholesale business is now behind us. Excluding these one-off impacts, the core business run rate was down 4.4% year-on-year as we continue to flatten the revenue trajectory. We have the best neighborhoods in the industry, as demonstrated by our network reach, serving 369 million TV homes, and that facilitated the signing of contracts valued at 450 million euros during the year. The most notable deals include an 84 million renewal with Sky, which followed a 90 million euro agreement in 2021, as well as important wins with Discovery Deutschland, ARD ZDF, ProSieben, Mola TV, QVC, and the addition of several free ad-supported TV or fast channels to our core neighborhood in Germany. Pricing on renewals continues to be stable to increasing, reflecting the pricing power earned in our video neighborhoods and improving penetration of high-definition TV channels. Meanwhile, more than 20% of our video contracts and revenues benefit from indexation clauses, adding to the solid long-term cash generation fundamentals of the business. And so then moving on to page seven and a recap of our strategic execution, delivering on the projects that create long-term value for our shareholders. As mentioned, CBAN is fully de-risked through the launch of the three satellites in 2022, and we will complete the filtering activities this year to secure $3 billion in CBAN proceeds. Getting SES-17 in service by mid-year was an important milestone, while the launch of the first two OTVM parasatellites points to our future platform for profitable long-term growth. When we add the DRS-GES acquisition and the addition of the $170 million from Verizon, we can be very satisfied with the year's work. And staying with O3BM Power on page 8, given its importance in driving future growth, we're on track to launch commercially towards the end of Q3, with customers ramping onto the system through Q4. Delays in the manufacturing of O3BM Power means that it's coming later than we would like and delays our growth, But Boeing has made good progress with satellites 3 to 6 in the last months, and we expect to launch them during the second quarter. We further optimized our launch planning after a good ride with the first launch, meaning a Q3 commercial introduction. Satellites 7 to 11 are not too far behind, with an enlarged constellation expected in 2024. We've also made good progress on the ground with gateways activated and a range of small, affordable, high-performance customer terminals fully validated, shipped to customers, and operational ready on O3B Classic. The O3B Empower technology stack and its multi-orbit platform is really performing well, and another important milestone was reached recently with the first end-to-end validation of our ARC adaptive resource control system, the space brain for O3B Empower, and at the heart, of our multi-orbit architecture. ART will deliver significant operational efficiency, deploying beams, power, and bandwidth across the system, monitoring performance, and adjusting power and bandwidth autonomously. While later than we'd like, the capability that we have with OTPM Power is phenomenal, and our whole focus for the next month is getting the system operational and supporting the commercial momentum that we have right now. And with that, I will hand over to Sandeep.
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