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SES: Q1 2023 Results

May 04, 2023

SES S.A. announces financial results for the three months ended 31 March 2023.

Solid Q1 2023 performance and on track to deliver Full Year 2023 financial outlook

· Revenue of €490 million (+9.6% YOY as reported) including contribution from DRS Global Enterprise Solutions and stronger US dollar

· Differentiated Networks business +2.9% YOY⁽¹⁾ including double digit growth in Mobility

· €90 million in new business signed in Mobility since 31 March 2023, including significant wins in Aviation and Cruise

· €110 million of renewals and new business in Video (-5.0% YOY⁽²⁾) demonstrating long-term attraction of our core neighbourhoods

· Adjusted EBITDA⁽³⁾ of €265 million (-3.2% YOY as reported) representing a margin of 54%

· 2023 outlook⁽⁴⁾ unchanged and on track (Revenue of €1,950-2,000 million and Adjusted EBITDA of €1,010-1,050 million)

Strong execution in delivering on key strategic initiatives in 2023

· First 4 O3b mPOWER satellites launched and next 2 satellites planned to launch in June 2023, paving the way for start of commercial service in late Q3 2023 with customers ramping onto the system through Q4 2023

· SES-17 & O3b mPOWER backlog of $1 billion⁽⁵⁾ with additional commitment of €195 million from Luxembourg government⁽⁶⁾

· US C-band Phase II on track: SES-18 & SES-19 launched, >95% of satellite transitions completed, and >90% of ground filters installed

· Well positioned for the European Commission’s IRIS² via strong consortium of space and telecom players focused on creating a state-of-art, multi-orbit space-based infrastructure for European governments and their citizens

Steve Collar, CEO of SES, commented: “2023 has started well with solid Q1 results and excellent progress on both O3b mPOWER and our US C-band project. Close to double digit revenue growth as reported reflects the contribution from our acquisition of DRS GES, while solid EBITDA performance underscores our continued focus on execution across the business.

We have good market traction with a number of deals signed since the start of the year with €90 million of backlog added in Mobility; a substantial upgrade with CNT in Ecuador including a transition to O3b mPOWER; a 5-year renewal with long standing customer US Army WIN-T programme; and a number of multi-year extensions, on excellent commercial terms, with private and public broadcasters in Germany underscoring the value of our industry-leading video neighbourhoods.

With the successful launch of the 2 remaining C-band satellites, our project to clear C-band spectrum to support 5G services across the US is entering its final phase, and we remain fully on track to earn $3 billion in accelerated clearing payments before year-end.

O3b mPOWER will deliver industry-leading capabilities, broaden our commercial market reach, and form a critical layer for sovereign Government solutions such as Luxembourg’s MEO Global Services programme. We are pleased to bring our multi-orbit credentials to a strong consortium formed of leading European space and telecom operators under the frame of the European Commission’s IRIS² project. Last week was a good week for O3b mPOWER with 2 more satellites launched successfully. We now have 4 satellites in orbit with the last 2 of the initial constellation slated for a June launch. Our ground networks are ready, customer terminals are being deployed and we anticipate commercial launch in Q3 in what promises to be an exciting year for SES in 2023.”

Key business and financial highlights (at constant FX and like for like unless explained otherwise)

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.

^{“At constant FX” refers to comparative figures restated at the current period FX, to neutralise currency variations. 1) “Like for like” which refers to as if DRS Global Enterprise Solutions had been acquired on 31 December 2021 (actually acquired on 1 August 2022).}

Networks revenue of €248 million increased 2.9% year-on-year, compared with Q1 2022, with double digit growth in Mobility (of +14.4%) and a robust outturn in Government (-0.6%), offsetting Fixed Data lower revenue (-1.6%) which included periodic revenue of €7 million in Q1 2023.

Video revenue of €242 million represented a reduction of 8.3% year-on-year compared with Q1 2022, or 5.0% year-on-year excluding periodic revenue of €10 million which was recognised in Q1 2022.

Adjusted EBITDA of €265 million represented an Adjusted EBITDA margin of 54.0% (Q1 2022: 61.3% and 56.4% on a like for like basis, assuming DRS Global Enterprise Solutions had been acquired on 31 December 2021).

Adjusted EBITDA excludes significant special items of €13 million (Q1 2022: €8 million), comprising net US C-band expenses of €4 million (Q1 2022: €7 million) and other significant special items of €9 million (Q1 2022: €1 million) related to acquisition costs and restructuring.

Adjusted Net Profit of €64 million included a net foreign exchange (FX) loss of €6 million (Q1 2022: gain of €11 million) which was partly offset by higher year-on-year reported capitalised interest and lower year-on-year reported income tax expense. Adjusted Net Profit excludes significant special items (highlighted above) and their related net tax benefit of €4 million (Q1 2022: €2 million).

The group’s Adjusted Net Debt to Adjusted EBITDA ratio (including 50% of the €1,175 million of hybrid bonds as debt) at 31 March 2023 was 3.6 times, compared with 3.5 times at 31 December 2022. At 31 March 2023, the total amount of remaining US C-band clearing cost reimbursements expected to be received in the future was approximately $600 million.

The Full Year 2022 dividend of €0.50 per A-share and €0.20 per B-share was paid to shareholders on 20 April 2023.

Contract backlog on 31 March 2023 was €4.7 billion (€5.9 billion gross backlog including backlog with contractual break clauses).

2023 group revenue and Adjusted EBITDA outlook (assuming an FX rate of €1=$1.09, nominal satellite health, and nominal launch schedule) is on track and expected to be between €1,950 - 2,000 million and between €1,010 - 1,050 million respectively.

Capital expenditure (net cash absorbed by investing activities excluding acquisitions, financial investments, US C-band repurposing, and assuming an FX rate of €1=$1.09) is also unchanged and expected to be around €550 million in 2023, with an average annual capital expenditure of around €385 million for the period 2024-2027.

On 29 March 2023, in response to rumours in the market, SES confirmed that the company has engaged in discussions regarding a possible combination with Intelsat. At this stage, there can be no certainty that a transaction would materialise. The Board of SES remains fully committed to acting in the best interest of SES and its shareholders.

Operational performance

REVENUE BY BUSINESS UNIT

^{1) As if DRS Global Enterprise Solutions had been acquired on 31 December 2021 (actually acquired on 1 August 2022) – see page 5. “At constant FX” refers to comparative figures restated at the current period FX, to neutralise currency variations. 2) Excluding periodic revenue (Q1 2023: nil; Q1 2022: €10 million). 3) Including periodic revenue of €7 million in Q1 2023 (Q1 2022: nil).}

Recent and future satellite launches

CONSOLIDATED INCOME STATEMENT

^{1) Earnings per share is calculated as profit attributable to owners of the parent divided by the weighted average number of shares outstanding during the year, as adjusted to reflect the economic rights of each class of share. For the purposes of the EPS calculation only, the net profit for the year attributable to ordinary shareholders has been adjusted to include the assumed coupon, net of tax, on the perpetual bonds.}

SUPPLEMENTARY INFORMATION

QUARTERLY INCOME STATEMENT (AS REPORTED)

^{1) Earnings per share is calculated as profit attributable to owners of the parent divided by the weighted average number of shares outstanding during the year, as adjusted to reflect the economic rights of each class of share. For the purposes of the EPS calculation only, the net profit for the year attributable to ordinary shareholders has been adjusted to include the coupon, net of tax, on the perpetual bonds. Fully diluted earnings per share are not significantly different from basic earnings per share.}

LIKE-FOR-LIKE REVENUE BY BUSINESS UNIT

(Pro forma as if the acquisition of DRS Global Enterprise Solutions had been completed on 31 December 2021)

^{1) Included periodic revenue of €10 million in Q1 2022. 2) Included periodic revenue of €4 million in Q4 2022. “Periodic” revenue separated revenues that are not directly related to or would distort the underlying business trends on a quarterly basis. Periodic revenue includes: the outright sale of transponders or transponder equivalents; accelerated revenue from hosted payloads during construction; termination fees; insurance proceeds; certain interim satellite missions; and other such items when material.}