SES YTD 2021 Results

Steve Collar, CEO of SES, commented: “Our laser focus on execution has delivered another solid quarter and we remain fully on track to deliver on our FY 2021 group revenue and EBITDA outlook. The strength and resilience of our Video business is reflected in the improved FY 2021 outlook on the back of important renewals and new business signed across our core neighbourhoods, and the continued positive momentum of our HD+ platform in Germany.

Our Networks business is continuing to perform well against the backdrop of an extended COVID environment with strong year-on-year growth in Government now complemented by growing quarterly run rate revenue in Fixed Data and Mobility, where we are starting to see a recovery in cruise and new bandwidth demand from our aeronautical customers.

The successful launch of SES-17 only two weeks ago was an important step in realising our vision of a seamless, integrated, and cloud-enabled network of the future. SES-17 will start to generate incremental revenue and EBITDA for SES in the second half of 2022. This will soon be joined in orbit by our second-generation Medium Earth Orbit constellation, O3b mPOWER, with launches starting early next year and the constellation on track for start of service before the end of 2022.

I am delighted to report that we have completed Phase One C-band clearing in the US, comfortably ahead of the December 2021 deadline, and we expect to receive the first $1 billion of accelerated relocation payments within the coming months. We have started to receive cost reimbursement from the Clearing House and we are on track to complete Phase Two clearing by December 2023, triggering an additional $3 billion of accelerated relocation payments.”

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1} Excluding restructuring charge and operating expenses/income recognised in relation to US C-band repurposing (disclosed separately)
² Underlying revenue, excluding periodic and other revenue (disclosed separately) that are not directly related to or otherwise distort the underlying business trends
³ At constant FX which refers to comparative figures restated at the current period FX to neutralise currency variations
⁴ Financial outlook assumes a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule
⁵ Gross backlog over $780 million (fully protected: $620 million)

Key business and financial highlights

SES regularly uses Alternative Performance Measures (APM) to present the performance of the Group and believes that these APMs are relevant to enhance understanding of the financial performance and financial position.

• Underlying revenue (excluding periodic and other) was lower by 2.7% year-on-year (at constant FX) at €1,318 million. Periodic and other revenue in YTD 2021 was €1 million (YTD 2020: €9 million).

• Video underlying revenue of €785 million represents a reduction of 4.1% year-on-year (at constant FX), compared with -8.0% year-on-year in FY 2020, where lower revenue from mature markets was partially offset by the growth of HD+ in Germany, higher revenues generated across International markets, and a recovery in Sports & Events. Q3 2021 underlying revenue of €259 million was 4.6% lower year-on-year (at constant FX) and 1.3% lower compared with Q2 2021.

• Networks underlying revenue of €533 million was flat compared with YTD 2020 (-0.6% at constant FX) with strong ongoing growth in Government (+7.7%) offsetting short-term COVID-related impacts on Mobility (-8.8%) and near-term declines in Fixed Data (-2.9%). Q3 2021 underlying revenue of €184 million (-1.3% YOY at constant FX) was 4.8% higher than Q2 2021 reflecting a recovery in Cruise, combined with new revenue from Aeronautical, Cloud, and Energy customers.

• Adjusted EBITDA of €823 million represented an Adjusted EBITDA margin of 62.4% (YTD 2020: 62.6%) and benefitted from a 2.1% year-on-year reduction (at constant FX) in operating expenses.

• Adjusted EBITDA excludes restructuring expenses of €7 million (YTD 2020: €28 million) and net operating expenses associated with the accelerated repurposing of US C-band spectrum which totalled €18 million (YTD 2020: €21 million).

• Adjusted Net Profit improved by 17.2% year-on-year to €225 million including the positive combination of the lower recurring operating expenses highlighted above, lower depreciation and amortisation expenses (down 7.3% year-on-year), and a 21.0% reduction in the net interest expense. Adjusted Net Profit also included a net foreign exchange gain of €24 million (YTD 2020: loss of €19 million).

• At 30 September 2021, Adjusted Net Debt (including 50% of the now €1.175 billion of hybrid bonds as debt, per the rating agency methodology) of €3,703 million was 4.2% lower than 30 September 2020 and represented an Adjusted Net Debt to Adjusted EBITDA ratio of 3.4 times (30 September 2020: 3.2 times).

• Contract backlog at 30 September 2021 was €5.2 billion (€5.8 billion gross backlog including backlog with contractual break clauses).

• In July 2021, SES completed a share buyback programme totalling €94 million. 12 million A-shares were purchased at a weighted average price of €6.56 and 6 million B-shares at a weighted average price of €2.62, maintaining the ratio of two A-shares to one B-share, as required by the Articles of Association. The shares acquired under the programme are intended to be cancelled, reducing the total number of voting and economic shares.

• FY 2021 revenue outlook (assuming a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule) is expected to be between €1,760-1,800 million (previously €1,760-1,820 million), including €1,030-1,040 million for Video (which is improved from €1,000-1,030 million) and €720-750 million for Networks (previously €750-780 million).

• FY 2021 Adjusted EBITDA outlook, excluding restructuring and net US C-band repurposing impact, is unchanged and expected to be between €1,080-1,100 million (assuming a €/$ FX rate of €1 = $1.20, nominal satellite health and launch schedule),having previously been increased from €1,060-1,100 million.

• Expected capital expenditure (net cash absorbed by investing activities excluding acquisitions, financial investments, and US C-band repurposing) is €300 million in 2021 and €950 million in 2022 reflecting growth investments in SES-17 and O3b mPOWER. Thereafter, capital expenditure is expected to reduce to €510 million in 2023, €570 million in 2024, and €340 million in 2025.

Operational performance and commentary

REVENUE BY BUSINESS UNIT

Video: 60% of group revenue

At 30 September 2021, SES delivers 8,555 total TV channels to 361 million TV homes around the world. This includes some 3,150 TV channels in High Definition which has grown by 8% compared with 30 September 2020. At 30 September 2021, 71% of total TV channels carried over the SES network are broadcast in MPEG-4 with an additional 5% broadcast in HEVC.

The impact from customers ‘right-sizing’ volumes in mature markets (Western Europe and the US), lower US wholesale revenue, and the decision to reduce exposure to low margin services activities led to an overall year-on-year revenue reduction, albeit at a much slower pace of decline as compared with the trend in 2020.

The initial benefit of the increase in the cost to renew a 12-month subscription implemented in March 2021 and continued growth in the average number of paying subscribers led to year-on-year growth for HD+ in Germany. Looking forward, the full annualised contribution from the price increase and the introduction of new Internet Protocol-based solutions, such as HD+ ToGo which was launched in October 2021, into the market are expected to support the future development of the business.

In addition, International market revenue was higher year-on-year, while revenue from Sports & Events is continuing to recover, with improved performance compared with YTD 2020 which was impacted by cancellations and delays caused by the COVID pandemic.

Networks: 40% of group revenue

Government

The positive contribution from new MEO- and GEO-enabled network solutions for the US Government led to overall strong year-on-year growth in revenue compared with YTD 2020. This was partly offset by the cancellation of services during Q3 2021 resulting from the US withdrawal from Afghanistan.

The growth in US Government was complemented by higher year-on-year revenue generated from Global Government customers for new capacity services and institutional solutions.

Fixed Data

Underlying revenue decreased compared with the prior period as lower year-on-year revenue in the Pacific region and wholesale business in Africa and Europe was not yet being balanced with the ongoing growth in new business from tier one mobile network operators, notably in the Americas, revenue ramp up in the global cloud segment, and new revenue generated from services in the Energy segment.

Mobility

The effects of the COVID pandemic on customers in the commercial aviation and cruise segments resulted in lower revenue compared with YTD 2020. This was partly offset by a positive year-on-year performance in commercial shipping revenues. The long-term fundamentals remain strong with revenue in Q3 2021 improving by €5 million (or 11.8%) compared with Q2 2021 and reflecting recovery in Cruise as ships return to service and new business providing additional capacity to commercial aviation customers.

Future satellite launches

CONSOLIDATED INCOME STATEMENT

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)

QUARTERLY OPERATING PROFIT (AT CONSTANT €/$ FX RATE OF €1: $1.20)

ALTERNATIVE PERFORMANCE MEASURES

SES regularly uses Alternative Performance Measures (‘APM’) to present the performance of the Group and believes that these APMs are relevant to enhance understanding of the financial performance and financial position. These measures may not be comparable to similarly titled measures used by other companies and are not measurements under IFRS or any other body of generally accepted accounting principles, and thus should not be considered substitutes for the information contained in the Group’s financial statements.