Eutelsat Communications: Second Quarter and First Half 2024-25 Results

February 14, 2025

The Board of Directors of Eutelsat Communications (ISIN: FR0010221234 - Euronext Paris / London Stock Exchange: ETL), chaired by Dominique D’Hinnin, reviewed the financial results for the Half Year ended 31 December 2024.

Eva Berneke, Chief Executive Officer of Eutelsat Communications, said: “First Half revenues and profitability were in line with expectations, and enable us to confirm our objectives for the full year, while our gross capex landing is now expected at €500-600 million, a reduction of c. €200 million relative to previous estimates.

The past few months have seen the alignment of several factors paving the way for Eutelsat’s LEO build-out strategy: first, the exercise of the put option for the sale-and-lease-back of our passive ground infrastructure, with proceeds due H1 calendar 2026 and second, confirmation of the European Union’s IRIS² multi-orbit constellation representing a key step in Eutelsat’s LEO strategy, which in turn defines the road map for the interim LEO constellation extension. We are actively working on a financing plan in line with our strategic road map and longer term leverage objective.”

KEY EVENTS

· First Half Operating Verticals revenues of €600 million up 3.9% ¹

· Adjusted EBITDA margin of 55.2%, stable year-on-year ¹

· Full Year 2024-25 Revenue and Adjusted EBITDA margin objectives confirmed

· Gross Capex landing now expected lower at €500-600 million related to timing of LEO investments and reinforced vigilance on GEO

· Goodwill impairment of €535 million in respect of GEO assets, reflecting lower expected future cashflows from these assets

· Put option exercised for sale-and-lease-back of passive ground infrastructure with c. €500 million net proceeds due H1 calendar 2026

· Confirmation of European Union’s IRIS² multi-orbit constellation project, delivering significant benefits at compelling cost; representing a key step in shaping Eutelsat’s strategic road map for the interim LEO constellation extension

ANALYSIS OF REVENUES²

Total revenues for the First Half of FY 2024-25 stood at €606.2 million, up by 5.9% on a reported basis and up by 4.4% like-for-like¹. Revenues of the four Operating Verticals (i.e., excluding ‘Other Revenues’) stood at €599.9 million. They were up 3.9% on a like-for-like¹ basis, excluding a negative currency impact of €2 million, with strong connectivity growth more than offsetting the decline in video.

Second Quarter revenues stood at €306.5 million up 2.9% like-for-like³. Revenues of the four Operating Verticals stood at €303.2 million, up 2.4% year-on-year on a like-for-like³ basis, and up 2.2% quarter-on-quarter.

Video (52% of revenues)

First Half Video revenues were down by 6.4% to €309.2 million, in line with the broader secular market decline.

Second Quarter revenues stood at €157.4 million down by 5.6% year-on-year, and up 3.8% on a sequential basis, reflecting the linearisation of revenue recognition on certain contracts. This trend does not alter the underlying cadence in Video of a mid-single digit decline.

Professional Video revenues, which account for less than 10% of the vertical, also declined reflecting ongoing structural headwinds.

Connectivity (48% of revenues)

Total Connectivity revenues for the First Half of FY 2024-25 stood at €290.7 million, up by 21.1% on a reported basis and up by 17.8% like-for-like¹.

Second Quarter revenues stood at €145.7 million up 12.7% like-for-like³ year-on-year, and stable quarter-on-quarter.

Fixed Connectivity

First Half Fixed Connectivity revenues stood at €118.9 million, up 22.2% year-on-year, mainly reflecting the continued growth of LEO-enabled connectivity solutions as well as a one-off impact from catch up revenues from a LEO customer.

Second Quarter revenues stood at €62.3 million, up 15.9% year-on-year and by 9.9% on a sequential basis, mainly reflecting the above-mentioned one-off impact.

Key contracts signed during the past quarter include a new multi-year agreement with Q-KON to expand Low Earth Orbit (LEO) satellite services across Sub-Saharan Africa, as well as a multi-year, multi-million-dollar partnership with NIGCOMSAT to deliver LEO satellite services in Nigeria.

Second Half revenues will reflect more challenging conditions for GEO-enabled consumer broadband in Europe, and notably by the temporary cessation of revenue recognition from a specific customer on the KONNECT VHTS satellite. Against this backdrop, Eutelsat is repurposing capacity on KONNECT VHTS to address a broader range of applications, notably Mobile Connectivity.

Government Services

First Half Government Services revenues stood at €96.4 million, up by 21.9% year-on-year, reflecting the contribution from LEO services. Second Quarter revenues stood at €50.1 million, up by 23.3% year-on-year and by 8.0% quarter-on-quarter.

The vertical is benefiting from improved US DoD renewals in the latest campaigns as well as increased demand from non-US governments.

Mobile Connectivity

First Half Mobile Connectivity revenues stood at €75.3 million, up 7.1% year-on-year, mainly reflecting demand for LEO-based solutions notably for maritime applications.

Second Quarter revenues stood at €33.3 million, down 4.5% year-on-year and by 20.4% quarter-on-quarter. This decrease reflected lower GEO revenues, as well as quarter-on-quarter, a one-off contract in the First Quarter of c. €3 million, not repeated in the Second, as well as higher equipment sales in the First Quarter.

Other Revenues

Other Revenues amounted to €6.3 million versus €1.6 million a year earlier. They included a €1 million positive impact from hedging operations versus a negative impact of €2 million a year earlier.

BACKLOG

The backlog stood at €3.7 billion on 31 December 2024 versus €3.9 billion a year earlier. This decrease reflects the natural erosion of the backlog, especially in the Video segment, partly offset by the growing LEO backlog. The backlog was equivalent to 3.1 times FY 2023-24 revenues, with Connectivity representing 56% of the total, and LEO now accounting for 48% of this segment.

Note: The backlog represents future revenues from capacity or service agreements and can include contracts for satellites under procurement. Managed services are not included in the backlog.

PROFITABILITY

Reported Adjusted EBITDA stood at €334.9 million on 31 December 2024 compared with €365.6 million a year earlier down by 8.4%. On a like for like basis, Adjusted EBITDA was up 4.9%¹.

The Adjusted EBITDA margin stood at 55.1% at constant currency (55.2% reported) versus 54.8% on a like for like basis¹ (63.8% reported). It reflected ongoing strict cost control measures as well as synergy benefits from the integration of OneWeb.

Operating costs were €64.3 million higher than last fiscal year reflecting the impact of the consolidation of OneWeb for six months of the current Fiscal Year compared with only three months for FY 2023-24. On a proforma basis, costs were up 3.7%¹, reflecting on one hand the embarkation of OneWeb at full operational run rate, and on the other, cost control measures implemented since the merger.

Group share of net income stood at -€873.2 million versus -€191.3 million a year earlier. This reflected:

· Higher Other operating expenses of €690.8 million, compared to €183.9 million last year. They include:

oA goodwill impairment €535 million in respect of GEO assets based on the test performed 31 December 2024. It reflects the cash flow forecasts adopted by the Group in its latest five-year plan, embarking the lower future cash flows the Group expects to be able to generate from its existing GEO assets. These take account of increased competition in the connectivity market and a greater than expected decline in demand for video services. This is consistent with the impact already experienced by the Group in lower Video customer renewal rates and more recently, the transfer of demand from GEO to LEO connectivity services.

o€117 million in satellite impairments.

· Higher depreciation of €433.7 million versus €316.1 million a year earlier, reflecting the perimeter effect from OneWeb as well as higher in-orbit and on-ground depreciation. (EUTELSAT 36D and 20 LEO spares entered service during the First Half).

· A net financial result of -€99.1 million versus -€60.7 million a year earlier, reflecting higher interest costs, partly offset by favourable evolution of foreign exchange gains and losses.

· A Corporate Tax expense of €7.6 million versus a tax gain of €28.5 million a year earlier, implying an effective tax rate of -0.9%. It reflects the non-recognition of deferred tax assets relating to losses in France and the United Kingdom, the net impact of the exemption mechanism for the share of Eutelsat S.A.'s profits allocated to the satellites operated outside France, including the related Pillar Two charge, the effect of the tax rates of foreign subsidiaries as well as the impact of impairments on the Group's satellites, particularly those in the Satmex arc.

· Losses from associates of €1.0 million versus €23.0, reflecting the contribution of the stake in OneWeb in the First Quarter of FY 2023-24, now fully consolidated.

GROSS CAPEX

Gross Capex amounted to €174.8 million, versus €313.7 million last year; this decrease reflects the GEO satellite program delivery and launch last year as well as lower LEO on-ground Capex versus last year.

First Half capex is not representative of expected FY 2024-25 outturn, which will embark the 100 LEO satellite batch order. Nevertheless, Capex for the full year is now expected in the €500-600 million range (vs €700-800 million previously) reflecting the timing of LEO investments as well as increased vigilance on GEO capex.

FINANCIAL STRUCTURE

On 31 December 2024, net debt stood at €2,695.8 million, up €151.8 million versus end of June 2024. It was mainly due to Capex-related movements and higher financial costs, partially offset by net cash flow generated by activities.

The net debt to Adjusted EBITDA ratio stood at 3.92 times, compared to 4.13 times at end-December 2023 and 3.79 times at end-June 2024.

The average cost of debt after hedging stood at 4.84% (3.16% in H1 2023-24). The weighted average maturity of the Group’s debt stood at 3.0 years, compared to 3.0 years at end-December 2023.

Undrawn credit lines and cash stood at around €1.24 billion.

NEXT STEPS

Recent weeks have seen the alignment of several factors paving the way for Eutelsat’s LEO build-out strategy:

Binding agreement on sale-and-lease-back of ground infrastructure

Eutelsat exercised the put option with EQT Infrastructure regarding the sale of a majority stake in its passive ground infrastructure assets leading to the signing of a binding Share Purchase Agreement. The transaction consists of the carve-out of the Eutelsat’s passive ground infrastructure assets to form a standalone company in which EQT will acquire 80% while Eutelsat will remain committed as long-term shareholder, anchor tenant and partner of the new company with a 20% holding. The transaction values the new entity at an enterprise value of €790m with the closing of the deal expected in the first half of calendar year 2026, delivering net proceeds of c. €500m, after tax, to Eutelsat for the sale of 80%, which will strengthen its financial resources and contribute to funding the LEO constellation extension.

Green light from the EU on the IRIS² constellation

The SpaceRISE consortium, of which Eutelsat is a key member, received the go-ahead from the European Union to design, build, and operate the IRIS² constellation, due to enter service in 2030, under an initial 12-year concession.

The project is valued at some €10.6 billion, with public funding representing c.60% of the total project cost, supplemented by private financing from the consortium members. For its part, Eutelsat will invest in the region of €2 billion, back-end loaded to the later stages of the project, giving it:

· Access to additional sellable LEO capacity of 1.5 Tbps out of total of 2 Tbps of LEO capacity

· Access to KaMil capacity not consumed by EU sovereign needs

· Scale advantages of shared fixed costs and R&D investments in new technologies

· Commitments from EU and Member States for IRIS² capacity worth several hundred of million euros

· Clearly capped financial commitment with strict milestones providing for exit and compensation in the event of missed targets compromising returns

Eutelsat is expected to generate revenues of at least € 6.5bn over period of concession.

Eutelsat’s involvement in IRIS² represents a key step in the company’s strategy to develop and expand its low Earth orbit capacities, and the extension of its existing OneWeb constellation will be technologically compatible with the future IRIS² assets.

Clearing road map for OneWeb extension

The confirmation of IRIS² delivers a road map for Eutelsat to plan the extension of its existing LEO constellation, including technological compatibility with future IRIS² assets. Following confirmation of the IRIS² contract, Eutelsat procured the first batch of 100 LEO satellites, for delivery by end of calendar-2026, ensuring continuity and enhancement of service.

Eutelsat estimates the extension of the LEO constellation up to the availability of IRIS² will require a further 340 satellites on top of this initial committed 100, equating to a total cost of the extension program in the region of €2-2.2bn euros between FY 2024-25 and FY 2028-29.

As mentioned above, Eutelsat’s contribution to IRIS² will be back-end loaded during the period ahead of the availability of the constellation, beginning in FY 2028-29.

Eutelsat is actively working on a financing plan in line with its strategic road map and longer term leverage objective.

FINANCIAL OBJECTIVES

The First Half performance was in line with our expectations. We confirm our FY 2024-25 objectives, of FY 2025 Revenues of the four operating verticals around the same level as FY 2024⁴, and an Adjusted EBITDA margin slightly below the level of FY 2024⁵. These objectives are confirmed despite the specific GEO consumer broadband headwind mentioned above.

Gross capital expenditure in FY 2024-25 initially expected in a range of €700-800 million euros is now expected c.€200 lower, in a range of €500-600 million euros.

Eutelsat also continues to target leverage of c.3x in the medium term.

UPDATE ON IN-ORBIT ASSETS

Since 1^st July 2024, the following changes have occurred in the Geostationary fleet:

· EUTELSAT 36D entered service at 36°E on 23^rd September 2024

· EUTELSAT 33E was deorbited in October 2024

· EUTELSAT 33F in service at 33°E, has started to be operated in Inclined Orbit in November 2024

· EUTELSAT 50A (ex-EUTELSAT 36B) entered service at 50°E in December 2024

Following these operations, the geostationary fleet stands at 35 satellites.

In October 2024, Eutelsat launched 20 satellites into low Earth orbit (LEO), further strengthening the OneWeb constellation.

CORPORATE GOVERNANCE AND SOCIAL RESPONSIBILITY

Corporate Governance

Changes to the composition of the Board of Directors

On 13th February 2025, Eutelsat announced changes to the composition of its Board of Directors, aimed at fostering greater agility in decision-making in the fast-evolving Satellite industry. Four sitting directors, Mia Brunell, Esther Gaide, Cynthia Gordon and Fleur Pellerin resigned from the Board. At the same time, Michel Combes was appointed by the Board as an independent Board Member until the next Annual General Meeting, where he will be proposed for a full term. Following these changes, Eutelsat’s Board of Directors is composed of 12 members, of which seven Independent Directors. It includes five women, equating to a representation of 42%.

Elsewhere, Dominique D’Hinnin informed the Board of Directors of his wish to retire from the Chairmanship and Board of Eutelsat Group. The Nomination and Governance Committee has taken note of Dominique’s intention and will undertake due process prior to recommending a new Chairman to the Board of Directors.