SES S.A. (Euronext Paris: SESG), a leading satellite operator, has reported solid financial results for the first half of 2024, meeting projections with €978 million in revenue and €528 million in adjusted EBITDA. The company's networks business was a significant contributor, accounting for more than half of the total revenue. Key developments included the launch of mPOWER, the successful deployment of ASTRA 1P, and the strategic acquisition of Intelsat, poised to enhance the company's multi-orbit capabilities and generate substantial free cash flow in the coming years. Despite a decline in video revenue due to a Brazilian customer's bankruptcy, SES maintained a robust media business and secured key contracts, including with the US Air Force and RTL Deutschland. With a strong financial position, including €146 million in adjusted free cash flow and a backlog of €3.8 billion, SES is optimistic about its growth trajectory and is committed to mitigating impacts through cost savings and revenue diversification.
Key Takeaways
- SES's revenue reached €978 million with an adjusted EBITDA of €528 million in H1 2024.
- The networks segment accounted for over 54% of total revenue, bolstered by new contracts and increased demand.
- The company launched mPOWER and ASTRA 1P satellites, and announced the acquisition of Intelsat.
- SES's media business remained stable, with significant contract renewals.
- Adjusted free cash flow stood at €146 million, with a strong backlog of €3.8 billion.
- SES paid €216 million in dividends and plans semi-annual distributions.
- Over $1 billion in C-band reimbursements have been received, with more expected in Q3.
- Financing for the Intelsat transaction includes a €3 billion bridge facility and a $1 billion term loan.
- Full-year revenue is projected between €1.94 billion and €2 billion, with adjusted EBITDA in the €950 million to €1 billion range.
Company Outlook
- SES anticipates revenues of €1.94 billion to €2 billion for 2024.
- Adjusted EBITDA is expected to be in the upper half of €950 million to €1 billion.
- The company is focused on growth through multi-orbit capabilities and innovation.
Bearish Highlights
- Adjusted net profit was impacted by increased expenses, leading to €111 million, lower than the previous year.
- Video revenue declined by €33 million, partly due to a Brazilian customer's bankruptcy.
- Fixed data revenue decreased by 15% in Q2, with no specific reasons given for the decline.
Bullish Highlights
- Networks business growth contributed €25 million to the total revenue.
- Government contracts show strong demand, with expectations for mid to high single-digit revenue growth.
- Cruise and in-flight connectivity businesses are experiencing significant demand.
Misses
- The company experienced a decrease in video revenue and fixed data revenue in Q2.
Q&A Highlights
- SES has received substantial C-band reimbursements and expects additional funds in the near future.
- The company clarified that the video and media segments are interchangeable terms.
- SES is witnessing growth in the sports and events business.
- Several government contracts are expected to be announced in the coming months.
- Partnerships, including with Starlink in the cruise business, are progressing well, though financial details remain undisclosed.
SES's performance in the first half of 2024 demonstrates resilience and strategic foresight in a dynamic market. With the integration of Intelsat and a focus on innovation and multi-orbit solutions, SES is well-positioned to capitalize on the growing demand for satellite connectivity and to navigate the challenges ahead.
InvestingPro Insights
SES S.A. (Euronext Paris: SESG) has shown resilience in its financial performance, and a closer look through InvestingPro Insights reveals a nuanced picture of the company's market position. With a market capitalization of $2.17 billion, the company's valuation reflects its role as a significant player in the satellite communications industry.
InvestingPro Data indicates that SES S.A. has a Price / Book ratio of 0.63 as of Q2 2024, suggesting that the stock may be undervalued relative to the company's net asset value. This could be of interest to value investors looking for potential opportunities. Moreover, the company's Gross Profit Margin stands strong at 68.23%, indicating efficient operations and a strong pricing power over its services.
One of the InvestingPro Tips for SES S.A. highlights the company's commitment to returning value to shareholders, as evidenced by its significant dividend payments. This is further reinforced by the fact that SES has maintained dividend payments for 26 consecutive years, a testament to its financial stability and dedication to shareholder returns.
For investors seeking additional insights and tips, there are more available on InvestingPro. In fact, there are 7 additional InvestingPro Tips for SES S.A. that can provide further depth on the company's financial health, stock performance, and future profitability predictions.
Overall, SES's solid financial results, combined with its strategic initiatives, position it well for future growth. The InvestingPro Insights suggest that despite recent market fluctuations, the company's underlying fundamentals remain robust, which may offer reassurance to current and potential investors.
Full transcript - SES ADR (SGBAF) Q2 2024:
Operator: Hello and welcome to the SES Half Year 2024 Results. My name is Caroline and I'll be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen-only mode. However, you'll have an opportunity to ask questions at the end of the call. [Operator Instructions] I will now hand over the call to your host Richard Whiteing, Head of Investors Relation to begin today's conference. Thank you.
Richard Whiteing: Good morning everyone. Thanks for joining this analyst and investor call for the H1 2024 results. The presentation was uploaded along with the press release to the Investors section at ses.com, if you don't already have it. As always please note the disclaimer on Page 2. The agenda as for today is outlined on Page 3. In a moment Adel Al-Saleh, our CEO will present the main business highlights followed by Sandeep Jalan, CFO to cover the financials in more detail. After some closing remarks from Adel, we will take your questions. So, with that let me hand over to Adel.
Adel Al-Saleh: Perfect. Thank you, Richard. Good morning everyone. I'm pleased to be reporting a solid first half of execution and important milestones that we have reached. Let's start on Page number 5. First of all, half one revenue and adjusted EBITDA were fully in line with our projections and we remain on course to deliver on all of our financial targets for full year 2024, with adjusted EBITDA tracking to the upper half of the range that we've given. Second, half one reflected continued strong performance in our networks business, with crucial crossover point in 2023 to now account for over 54% of the total revenue of the company. Government was a standout performer and secured impressive wins across both the U.S. and global government business. Air One Cruise, including the periodic revenue in first quarter in Cruise, also delivered strong growth. Third point bringing mPOWER into service in April was a significant milestone for us and we're now ramping committed customers onto the network. I also got to experience my first SES launch with ASTRA 1P taken off in June. This is an important satellite for us. It sustains the long-term cash flows for our Media business in the neighborhood at 19.2 degrees East where we serve almost 120 million households. That's over 300 million people. Lastly, and most significantly, our transformational agreement to acquire Intelsat and the integration of the two companies will, from expected closing the second half of next year, create a stronger multi-orbit operator. The combined company will be well-positioned to compete with competitive end-to-end solutions in valuable growth markets where we have the right to win, underpinned by strong balance sheet fundamentals and sustained cash flow growth to drive value for customers, employees, and shareholders. Moving to our key financials on Page 6. Revenue of €978 million and adjusted EBITDA of €528 million were broadly stable year-on-year. As I mentioned, we delivered a growing performance in the networks. Meanwhile media performance was consistent with our expectations. We secured important additional signings that underscore the solid fundamentals and cash flow generation of this business going into the future. Execution and laser focus on efficiency and cost means that adjusted EBITDA is tracking well. We expect full year 2024 to be in the upper half of the target range set in February. Adjusted free cash flow was 70% year-on-year, partially helped by lower run rate and CapEx than what we had expected. We remain within the guidance of €500 million to €550 million for the full year. Finally, our backlog stood at €3.8 billion at the end of June, including some €430 million of signings across the business in first half of the year. Pipeline for the second half of the year looks good, which will keep our backlog healthy. Let's move to Page number 7. I wanted to share two important wins in the first half of the year. The first example is a government solution where SES Space and Defense has been awarded a multi-year contract by U.S. Air Force Air Combat Command to support its remote-piloted aircraft training and testing program. The contract is totaling $47 million. The important highlight of this is that this is the third contract iteration for the U.S. Air Force Mission, which shows you long-lasting partnership we have with these customers. We will deliver transmissions coverage of the US and the Pacific Ocean as well as network management and monitoring solutions. Second example is a media example, where RTL Deutschland recently extended their long-term partnership with SES at 19.2 degrees East with a new contract worth tens of millions of euros that will run to the end of the decade. In addition to satellite capacity, we will now be providing value-added uplink services for their TV channels, expanding the scope of our relationship with RTL as well as the contract duration. There are many other examples in government, with NASA, and the US army, in mobility with Virgin Voyages and Resorts World Cruises and fixed data with INRED and in media with QVC and TVMonaco. Let's move to slide number 8. Moving to the performance of the business units in the first half in more detail. With networks, you can see that the revenue grew 5% year-on-year. In the networks business, the government we improved it by 8.4% year-on-year with high single-digit expansion in both US and global business across the world. Mobility was at 11.1% year-on-year growth. That included double-digit growth in maritime from the periodic revenue we booked in Q1 and new cruise ships that were added to our service portfolio as well as single high-digit growth in aviation for new contracts signed to support IFC partners. In fixed data, the comparison to last year was impacted by the periodic revenue we recognized in first quarter 2023 which accounted for two-thirds 2/3 of the variance. Excluding this item the business was down by low single-digit percentage as lower revenue from Europe and Asia was largely offset by growth in Latin America. Network's backlog stood at €1.9 billion with some €310 million of signings in first half of the year. As I highlighted already, the entry of mPOWER into commercial service was a key milestone for SES with committed customers now being deployed. We remain on track to expand the initial constellation of mPOWER starting with the next launch of satellites 7 and 8 at the end of this year, followed in 2025 with satellite 9 10 and 11 I should say and in 2026 with satellites 12 and 13. With that, increasing the capacity of the network and accelerating our profitable long-term growth trajectory. Turning to page number 9. Notwithstanding the headwinds, we're facing on the topline the fundamentals of our media business remain robust and supportive of solid cash generation for business which delivers high-quality content to world-wide audience of 363 million households, ladies and gentlemen that's over one billion people. The DACH business including our popular HD1 consumer platform is our most valuable business within media, generating over €300 million of annual revenue and as used by the public as free-to-air broadcasters as well as some 18 million direct-to-home households. SES value proposition in this segment was evident in the stable revenue performance in first half of the year and improved trajectory over previous years. Rest of Europe is our second largest unit also generating over €300 million per year, delivered to our expectations with an expected mid single-digit decline year-over-year. Meanwhile, we continue to focus on managing the structural headwinds across other markets, especially in the mature markets in North America and Asia. Our sports and events business continues to be a standout performer with double-digit revenue growth and an ever-expanding list of Tier 1 global customers like NFL Premier League and of course Olympics. Turning to SES to leverage our existing global reach and expertise in content management aggregation and distribution. ASTRA 1P successfully launched in June as I said earlier, bringing the latest technology to replace capacity at the most valuable video neighborhood at 19.2 degrees East, where we will be replacing four satellites with one. ASTRA 1Q will follow later and will provide redundancy and bring the ability to grow by expanding our network business further in Europe. Let me close out the section on page number 10 with our important and transformational agreement to acquire Intelsat for an equity consideration of $3.1 billion. Since announcing the deal at the end of April, the regulatory process of obtaining all necessary clearances is well-underway and we remained fully on track to closing the acquisition during the second half of the year. At the same time, the two companies are making strong progress in terms of detailed integration planning while respecting all legal and regulatory requirements as the two businesses continue to operate fully independently. I believe most of you have seen the financial information that Intelsat has published on their website. They are continuing to execute well against their full-year revenue and adjusted EBITDA targets and supporting their own strong balance sheet. The transaction is now fully financed after a successful syndication of €3 billion compromising of €2.1 billion bridge facility and $1 billion term loan, providing us with financial flexibility to deleverage over time. Also importantly and as expected both Moody's (NYSE:MCO) and Fitch confirmed SES' investment grade rating after the transaction was announced. This acquisition is significant in four key areas. First, it is highly accretive. We have a clear line of sight to achieve €370 million of combined OpEx and CapEx synergies. And through the integration planning work that I mentioned we're building robust execution plans that we will be implementing starting on day one of closing. This will ensure that we can deliver 70% of the total synergies by no later than the end of year three. At the same time, we'll continue to explore opportunities we believe are there to capture additional synergies. Second, the combination of our complementary satellite fleets, ground networks, spectrum portfolios and capabilities will create a stronger multi-orbit competitor, capable of providing greater service options and resilience. Third, 60% of the combined revenue is generated from valuable growth segments where the benefits of a multi-orbit architecture are best placed to serve sophisticated requirements for reliable high throughput and low latency connectivity. Lastly, the acquisition accelerates profitable growth and cash generation. Sandeep will cover this in more detail shortly, but we expect that with the growth in the combined business and synergy execution, the combined company will be generating more than €1 billion of free cash flow by 2027-2028 timeframe, i.e. within two to three years of closing. With this ramp-up, we achieved rapid deleveraging with net leverage reducing to below three times within 12 months to 18 months of closing. With this profile, we will build potential for increased level of shareholder return in the future through our progressive dividend and/or additional share buybacks. And, of course, we simultaneously enhance financial flexibility to invest profitably in network and service innovations, as well as applications of the future to ensure that SES remains competitive in this fast-moving and dynamic SatCom industry. With that, I will turn it over to Sandeep to go through the financials in more detail.
Sandeep Jalan: Thanks Adel. Good morning, everyone. We are very happy with our solid first half financial performance. This demonstrates our competitive value proposition, strong execution across the business, cost discipline, solid cash conversion, our strong balance sheet and commitment to shareholder returns. Starting with the income statement on page 12. Revenue of €970 million was broadly stable compared to first half of last year and at constant ForEx rate. Adjusted EBITDA of €525 million, it was lowered by about 1% or €5 million compared to the prior period. As you can see from the chart on the right, the main components of this were the growth in network of €25 million or about 5%. It included periodic revenue of €22 million in quarter one of this year as we had announced earlier. This was offset by a decline in video of €33 million or about 6.7%, while recurring OpEx was slightly favorable year-on-year and contributed to adjusted EBITDA margin of 54% in first half of this year. Looking at the other elements in the adjusted net profit of €111 million which was also €5 million lower compared to first half of last year. Interest earned on more than €two billion of cash it led to net financing expense being €49 million lower and offset the higher expense for depreciation, amortization and tax. That increase in depreciation and amortization arises primarily from a change in accounting where we have elected to treat indefinite life intangibles as definite life amortizable intangibles further improving alignment of our accounting policies with the IFRS standards. Lastly, the difference between adjusted and reported net profit is explained by a net impairment expense of €25 million which includes a €34 million write-down of a geo satellite in line with the evolution of our media business in Brazil following the outcome of a customer's bankruptcy process, which I'll speak about in bit more detail shortly. Additionally, significant special items amounted to an expense of €20 million and included also acquisition-related costs. These items were partly offset by net tax benefits of €7 million. Turning now to cash flow and the balance sheet on Page 13. Adjusted free cash flow of €146 million was €61 million or about 70% higher year-on-year. This included CapEx of €140 million, which was about €80 million lower than in the prior period. However, we would expect a higher CapEx run rate in second half of this year in line with the €500 million to €550 million CapEx outlook that we had given for the full year 2024. Our strong balance sheet has sizable cash balance of over €2 billion which is continuing to earn a healthy interest of over 5% and this has yielded about €60 million of interest income in cash in first half of this year. We have paid €216 million or about €0.50 per a share of dividend to our shareholders in April. We will now implement the change to semi-annual distribution of dividend with the payment of an interim dividend of €0.25 per a share this coming October. On top, we are continuing to buy back shares. Until the end of last week we had bought back more than 18 million FDRs and expect to complete this program of €150 million share buyback during the coming months. We will also buy back sufficient volume of B shares to maintain the required 2:1 voting proportion. Adding the dividend payments during 2024 and the share buyback equates to almost €0.5 billion of cash returned to shareholders. That's a very attractive yield. On the C-band reimbursement front we are finally seeing even good acceleration and good progress. To this date, we have received over $1 billion and we have now received confirmation of further reimbursements during quarter three amounting to over $200 million. This is very good news. As you would have seen we have successfully completed the transaction financing of €3 billion it consisted of €2.07 billion bridge facility commitment as well as $1 billion term loan. Our balance sheet continues to be industry-leading with net leverage of 1.7 times at the end of June and as was already mentioned by Adel our investment grade credit status was reiterated by both rating agencies following the announcement of the Intelsat transaction. This reflects rating agency's view of the compelling logic of this transaction with Intelsat and our commitment to maintaining investment-grade balance sheet metrics with strong cash generation delivering mid single-digit growth in adjusted EBITDA with faster growth in cash EBITDA, normalized CapEx of between €600 million to €650 million and low level of interest and tax. As such the combined company is expected to generate more than €1 billion of normalized adjusted free cash flow by 2027 to 2028 timeframe including the ramp-up of significant synergies by the third year. This gives us financial flexibility to create value for shareholders through the combination of a strong balance sheet, cash returns and disciplined profitable investment. You can find more details regarding these financial projections in the appendix of this presentation. Finally, moving now to the Page 14. I'll present the standalone financial outlook. This is fully on track. We expect revenues in the range of €1.94 billion to €2 billion with a step up from H1 to H2, being driven by ramping customers onto mPOWER, while media revenue for the second half should be at least similar level as in first half of this year. As mentioned by Adel, we are tracking well against our adjusted EBITDA target of between €950 million to €1 billion and we are confident that will end up in the upper half of this range. As mentioned already CapEx remains within the range of €500 million to €550 million. I also want to mention that during quarter two, a bankruptcy court approved the restructuring plans of SES media customer in Brazil while SES has secured the revenue for full year 2024 from this customer, it is expected that the outcome of this bankruptcy process will result in lower revenue during 2025, which will be equivalent to approximately 5% of annual media revenue. SES expects to at least offset this impact on adjusted EBITDA starting from 2025 through additional operating efficiency actions as well as commercialization of our group's deal pipelines. Now I will hand back to Adel to conclude.
Adel Al-Saleh: Thank you, Sandeep. Can we move to slide number 16? And let me just summarize the key takeaways from our first half performance. Driven by our strong competitive offerings in Government and Mobility, our network business continues to deliver growth and value for our clients. This is complemented by Media business with solid fundamentals and execution notably in the most important markets and segments that we serve. Our performance in the first half has put us in good position to deliver full-year adjusted EBITDA within the upper half of the range that we've given from February. Our cash flows are growing and our balance sheet is the strongest in the industry. We're returning a meaningful amount of cash to shareholders and thinking hard about when the right time is to expand this. Finally, we're taking the right steps to strengthen our multi-orbit offerings and competitive position for the long-term with the agreement to acquire Intelsat, where the combined company will be the stronger and more capable than would be possible for either company on a standalone basis. I want to conclude on page number 17, with a brief overview of our evolved strategy and what to expect from SES going forward. First, I'm a firm believer that our target segments and use cases there is no single orbit capable of meeting all of our customers growing demand for reliable, high performance, low latency connectivity. Therefore, multi-orbit will become essential but it should not create complexity for our customers. We are investing in and perfecting a strong intelligent multi-orbit network capability that forms the backbone of our vertical solutions. But those solutions will remove complexity at the customer level. Customer centricity for us means we focus on our customers' requirements holistically, not partially. This gives SES an compelling right to win. Implicit in that is our discipline and focus on the right kinds of customers and the right kinds of solutions. We want to compete where our differentiation resonates enabling us to win. Second to build that competitive differentiation, we are continuously investing in innovation that can supercharge our core capabilities. Innovation in our space and ground network, innovation in our digital layer, innovation in our operational service delivery, these are our capability engines that will drive all our vertical solutions. These three key strategic priorities will sustain and enhance our position as a trusted, attractive partner to help drive our customer success. In turn, this will drive growth in our revenue, EBITDA and free cash flow. Third, we are rebuilding SES to focus on execution. This means getting leaner, more agile and more efficient across all aspects of the organization and processes. This initiative is well underway. And we are already seeing the benefits of that. Of course, all of this is amplified by the highly accretive and compelling benefits of bringing together our businesses with Intelsat. With that, we're happy to take your questions.
Operator: Thank you. [Operator Instructions] We will take the first question from line Nick Dempsey from Barclays (LON:BARC). The line is open now. Please go ahead.
Nick Dempsey: Yes. Good morning guys. I have three questions. So first of all, just regarding the impact from that Brazil customer in 2025, when you're talking about mitigating that. Is that all about cost savings or are you able to find other ways to fill some of that capacity and recapture some of that lost revenue? Second question, I guess the key factor in free cash flow this year is the level of cash repayments you'll receive related to those C-band costs incurred. I can see that you said $420 million still to come. And I think you've received none in first half. So can you give a rough idea of, how much you might expect to land in the second half of 2024 and that sort of timeframes on that? And just the third question, on the financing you have put in place related to the Intelsat deal. So you talked about a €2.1 billion bridge facility and also the $1 billion five-year term loan. Can you give us an idea of the cost of those two different facilities? And also whether they are unsecured or whether there is additional security or guarantees for those loans compared to the bonds?
Adel Al-Saleh: Okay. Very good. Let me start answering. And then, of course Sandeep, will dive into the second two questions. So first of all impact of the Brazilian customer and how do we mitigate it? Primary focus is to mitigate it through cost. Something we can take to the bank, something we can secure. It is something we control very well. Of course, in addition to that we will drive incremental revenue activities in order to secure additional growth and additional revenue. But we will make sure that we have it covered first with cost and then revenue would be hopefully an additional mitigator, if we need it in that particular situation. I'm going to let Sandeep, answer the two other questions.
Sandeep Jalan: Yeah. So regarding your question on the free cash flow from the C-band, we are making really good progress. Of course, there have been large delays in getting these reimbursements, but where we stand today we are in a good position. I might like to recall that, on this we have spent close to $1.5 billion, out of which $1.4 billion is reimbursable. At the end of June we had received already above $1 billion which is in our pocket. And during past few weeks, actually we received confirmation from the clearinghouse that additional amount of more than $200 million should be in the mailbox. So during quarter three we would expect to receive it. So that leaves us another $200 million to be realized further. As of now we would expect this to be coming during the subsequent quarters of this year as well as during 2025. So we are continuing to engage in those conversations with the clearinghouse to make as expeditious reimbursement as possible. Regarding your question on financing, this is a very good outcome. We had a very good outcome on this bridge financing this deters us from closing this transaction €3 billion financing fully secured. I want to say that this entire financing is fully unsecured. At SES balance sheet, we do not have any debt whatsoever which is secure. So this is a totally unsecured facility. So €2.1 billion is a bridge facility that we will continue to finance in the market with the market takeout financing, during the coming quarters as we go towards the closing date. And the $1 billion term loan it is with several banks and this will be amortized over five years. So this is a dollar loan. It is at very competitive rates. And it remains within the total financing cost range that we had given, which is $325 million to $350 million range for the combined company.
Adel Al-Saleh: Yeah. I think that's really important to note right, so people can model it correctly. That is the range we expect to be in. And we're quite confident we'll be in that range.
Nick Dempsey: Okay. Thanks.
Operator: We will take the next question from line Carl Murdock-Smith from Berenberg. The line is open now. Please go ahead.
Carl Murdock-Smith: Thanks very much for the questions. Three from me as well please. Firstly, you seem to have interchangeably used the phrase video or media quite a lot during the presentation. I was just wanting clarification do you mean the same thing when you say video or media specifically with regarding to your comments around the impact of the Brazilian customers' bankruptcy next year being a kind of 5% headwind to media revenue? Just confirming you also mean video revenues. Then secondly also in relation to video, you talk about double-digit growth in sports and events. I was just wondering if you could kind of disentangle how much of that is underlying versus related to specific events. I'm just thinking in terms of it's felt like I've gone home every night and watched sport for the last few months certainly. So I was wondering how much of it is in relation to kind of current events? And obviously, also thinking forwards ahead to Q3 given the Olympics going on, et cetera, so comments on underlying versus the specific there. And then thirdly, on depreciation and amortization. You've seen higher D&A this quarter saying it's arising mainly from a change in accounting treatments of orbital slot license rights. Can you just expand a bit more on that change and what we should be expecting going forward? Thank you.
Adel Al-Saleh: Well, thanks. Thank you for the question. The first one is quite easy. Yes, when we say video and media it's the same thing. So I apologize if we confused you guys by changing using different words. So, we'll try to stay consistent going forward. But it is exactly the same thing. Sports and events, it's a really exciting platform for us. Like what we've done there is we've build a compelling service and a platform a technology platform that enables events in general to be able to come on the platform very quickly and do a very efficient distribution of that across the world. And although, it is absolutely -- you're absolutely right, it is driven by events the good news is there are a significant number of events that are all seasonal in nature across the world. So the events today of course are driven by what happens with Olympics, it happens every four years, but in the second half of the year there are the Asian Cups there are different Asian competitions. In the beginning of next year, the NFL Super bowl comes back again, etcetera, which we were part of and so on. Other events I don't want to mention some of the customers that are protective a little bit are year-long events and et cetera. So what's good to see is despite the fact that we are dependent on these events the business has delivered consistent double-digit growth for the last eight quarters. And actually, we have an ambition to make that business significantly larger than what it is today, because it's really getting traction. So you can't say it's underlying, but the nature of the business, because it's driven by events is -- becomes underlying because the events change every quarter. There are different events that we have been able to win. So hopefully that clarifies it and clarifies why we're excited about that part of the media business. On the D&A please.
Sandeep Jalan: Yes. So amortization and depreciation this is what I already explained earlier. This basically pertains to certain orbital slot rights. As you know that on our balance sheet, we have a intangible assets and this primarily now consists of orbital slot rights. And these as per the prior policy they were not being amortized over years and we have taken a reassessment of that entire position. And based on that we are starting to amortize those orbital slot rights. And that reflects this impact that we show here on slide 12, which represents about 29 million, which is primarily coming from that position of orbital slot rights being changed from non-depreciable to depreciable slot rights.
Carl Murdock-Smith: That's right. Thanks very much.
Operator: Thank you. [Operator Instructions]. We will take the next question from line of Sami Kassab from BNP Paribas (OTC:BNPQY). The line is open now. Please go ahead.
Sami Kassab: Thank you very much and good morning everyone. I have a few questions please. The first one on SES video. You were previously talking about flattening the curve in video and yet the Q2 performance of SES video is one of the worst reported in close to five years. So can you help us understand what drove the acceleration in the decline in Q2? And how should we think about SES video revenue trends into 2025? Shall we now expect double-digit declines given Brazil? And on the back of what you just said, Adel, can you quantify the sports and events revenue size, please? And then secondly on networks, you won quite a few contracts with government reported double-digit revenue growth in the quarter. Can you maintain this rate of growth for the remainder of the year in government? Thank you.
Adel Al-Saleh: Very good questions. Thank you for that. Look on video, clearly, we have been always guiding that we would see this business at about mid single-digit decline, on medium term and long term. Clearly, in the first half of the year, we've seen some headwinds specifically around this customer that we have described right, which impacted our overall revenue, which is why it's important to look and why we're disclosing, how is the business doing in your key regions and our key regions where majority of our revenue were over €600 million annually being generated is between DACH and Europe, the rest of Europe. And those businesses, DACH was even stable year-on-year, so flat, if you will. And Europe was exactly where we thought the business would be, which is middle single-digit decline around minus 5% as we had expected. So the business was dragged down by this situation in Brazil. Now the question about how do you think about it next year? We're still quite confident, about the prospects of the business and the ranges that we keep talking about. Clearly, next year, we will have headwinds right? Because 5% of the business disappears even though we had a long-term contract with that customer, which is why we're focused to make sure we mitigate that with our cost activities, which we are very confident that we will do right. So the question will be is can we mitigate it with revenue activities right to stabilize the revenue further? And that's something, we will lean hard on our sports and events team right, we want them to go beyond the double-digit growth. We actually want them to grow much faster. And we'll see what we can do. But on a mid-term basis, knowing that 2025 is going to be impacted by this 5% impact of a client, should remain the same. The same as we've had it before, exactly, because the biggest business within that organization, within that business overall, continues to be exactly where we expect it to be. Right? So, that's on that. Now, unfortunately, we're not ready to disclose sports and events' exact number, but we will do it in the next quarterly releases, because what we would like to do is actually not only release what we have today, but be a lot stronger in our conviction of the future, right? And where we want to take this business right rather than just give you some numbers at this point. By the way the numbers are floating within our financials somewhere, which I don't know if it includes if it's there or if it's not, et cetera. So, but a lot more on that in the future. On the networks, look the dynamics that you see, which is that high single-digit government growth and I think the aero and the cruise business performed better than our expectations honestly. The dynamics going forward is as follows. We expect our government business to continue to deliver mid to high single-digit revenue growth. We think it's absolutely, sustainable. There'll be some important wins, we'll be announcing. Unfortunately, we couldn't get it done and closed for this quarter announcement, but we'll be announcing, I'm sure in the third quarter that further demonstrates the traction in that business. And it's driven by the fact that, both the US government as well as European government and other global governments international governments, see satellites as a key component for their strategy both in military use as well as non-military use. So we see the demand, whether it is in as I said in military missions or in social connectivity and digital initiatives that they have across the countries is very strong. And the governments are not looking for one solution. They're looking for multiple orbits and with our unique NEO capability and GEO combination and partnerships in NEO, we see that demand to continue to be strong. We also see our cruise business, if you normalize for the periodic revenue we got in first quarter because due to one single contract we'll continue to be strong. And we see that evolving by looking at how are we doing in terms of new ships wins, right. That's an important key indicator for us, as we look in the future of the business. And we're happy where that -- our team has taken us and growing it. And in our IFC business, there is massive demand. Today, a lot of our business in that segment is to our partners. We're getting pulled into a lot more airlines asking us to bid direct. In some cases, we include the partners in some cases they really want us to be bidding direct. So we see the momentum and the opportunity of new airlines turning on connectivity in their airplanes to be very robust going forward. So you should expect the overall networks business' momentum to be exactly how you see today. That's what we're expecting that's what we're driving and that's where we're putting a lot of our investments to ensure we have the solutions that are very competitive. I hope I answered your questions.
Sami Kassab: Perfect. Thank you very much.
Operator: Thank you. We will take the next question from line Alexander Peterc from Bernstein. The line is open now. Please go ahead.
Aleksander Peterc: Good morning, and thank you for taking my question. I just have two. The first one pertains to the phasing of the headwind you're going to have from this Brazilian operator's lower revenue. It seems to me that we're shifting from minus five, which is the second decline for your video business to minus 10 during the time when you have this base effect of this Brazilian customer. So is this kicking on in as of the second quarter and then continues for the next 12 months? Or is it a different phasing? I'd just like to understand where exactly we should model this downward trend in video. And against that backdrop can you just confirm that you'll still be in a position to report like-for-like growth in 2025 overall with the growth in networks offsetting entirely that video decline? And then the second question, if you could detail the reasons behind the 15% decline in the second quarter in fixed data like-for-like, what exactly caused this drop and will this reverse in the second half as you have more capacity coming on stream with mPOWER? Thank you.
Adel Al-Saleh: I'm sorry repeat the last part just the last part of the like-for-like question. We didn't get it. What exactly was the question?
Aleksander Peterc: It's the fixed data was down 15% in the second quarter. And I'd just like to understand what exactly happened there and if that is going to reverse in the second half. Thank you.
Sandeep Jalan: Yes. So on your first question concerning media as we explained the impact of this customer in Latin America, in quarter two, we had a negative impact coming from that. If you exclude that impact, it's basically in the same range that we had guided for, which is the mid-single-digit decline. However, this customer and this particular restructuring it doesn't impact the overall revenue for the full year, right. So this adjustment, it reflects for the cumulative position of the year where it had a negative impact. But with the recognition that we will have in the rest of 2024, it does not make any impact. So we would expect media to be in line with the outlook that we had provided at the beginning of this year. That means mid-single digit decline for 2024. As we move in 2025, we will see about another 5% impact on media. This will be only in 2025 on top of the mid single-digit that we guide for the midterm outlook. And that remains the same trajectory going forward. Speaking about fixed data, fixed data in quarter two it was a difficult quarter for our fixed data business. We had some difficult revenues in Europe, as well as we had explained earlier as well some one-off revenues in prior year. And as we move into quarter three, we would expect some uplift. In quarter two, as we entered quarter two, we have also prioritized some other verticals like government and mobility much more on the mPOWER. As we go into second half of the year we would expect further ramp-up in our fixed data business. But this remains really a challenged part of our business. And as Adel as well explained we would expect a step up in this business.
Adel Al-Saleh: Yeah. So the fixed data, I'm not sure how like-for-like was minus 15% actually the like-for-like for fixed data would have been a lower decline versus reported because we have this periodic revenue in first quarter that of 2023, right? So the minus 15% would not be accurate and Richard can follow up on exactly what it is.
Richard Whiteing: Just if I expand on that, 15% is the number for quarter 2. I think we should take a look at the number for the first half of this year, where it was minus 8% and if you normalize this one-off that was in first half of last year, then actually it's a very low single-digit growth about 2%.
Adel Al-Saleh: Yeah. And part of the dynamic there look, it's a good question because that is a segment that we are looking very, very hard at and we've become a little bit more selective of kind of the kind of customers we go after where do we put our capacity avoid the very large commoditized segments within that fixed data right. So we had selected already in the first half of the year, our leadership has selected not to pursue certain things. Partially, we're in a unique position where our capacity is quite highly-demanded. So, we are very picky, where do we deploy that solution or a capacity versus going after a quite commoditized or highly price-sensitive segments. As I described in our strategy evolution, we are focused on areas where we can differentiate and there are plenty of areas in fixed data to differentiate. The sell cycles are longer, but the long-term trajectory of those are much better for us as we go forward. And your question on, how should we think about 2025, this is not a 2025 forecast call, right? But as I said in the beginning, first of all, the impact of the Brazilian customer we fully expect to mitigate on bottom line which is really important, that's point number one. We will also work very hard to mitigate the revenue impact. So as overall company, we will work very hard to make sure that our overall performance continues to be stable or slight growth and not accept the fact that we have a customer impact that will then drop to the bottom line or to the topline of the company. I want to make sure you don't model us incorrectly going forward assuming that this thing is going to just drop and we are unable to mitigate it.
Aleksander Peterc: Okay. Thank you. So just to clarify, you're saying video we have the full impact next year minus five on top of the minus five cycle of decline that's minus 10. So networks need to grow by 10% for you to be flat in 2025? Is that the right way of looking at it just dramatically?
Adel Al-Saleh: Yeah. Look, there are a couple of things. Broadly, directionally, you're correct. However, there are several levers we also have in media to mitigate some of that revenue decline. So it doesn't have to be minus 5 and minus five equals 10. How much of it, we will disclose as we get into 2025, right because there are a lot of things we're doing in the second half of the year, especially new contracts, new things sports and events big, big, big contributor as well. For media, we're also rolling out multiple free-to-air neighborhoods in addition to what we currently have in our business. So there are multiple activities in the media business that should be able to help us in 2025. But we will quantify over that in due course right. But I wouldn't see it as minus 5 and minus five equals minus 10.
Aleksander Peterc: Very clear. Thank you, very much.
Operator: Thank you. We'll take our last question from line of Roshan Ranjit from Deutsche Bank (ETR:DBKGn). The line is open now. Please go ahead.
Roshan Ranjit: Great. Good morning everyone. Thank you for the questions. I've got 2 please. Firstly on the government business which as you highlighted has done well in the first half of the year, we've seen a few of the announcements particularly I guess yesterday around the GEO business and having signed the contracts with the US government on GEO HTS. So my question is and I know you don't disclose the mPOWER backlog, but you had previously talked about the second half of the year being dominated by filling the backlog with government contracts having previously focused on mobility. So, could you give us a sense of how that has been trending? You said that, you expect government to be strong in the second half of the year I guess that will be driven by mPOWER. But I mean, how many contracts have you signed I guess so far and how many do you expect to sign for the rest of the year? And lastly, just quick one, the Starlink partnership, any color you could give us on how that is progressing and any kind of revenue contribution as part of the partnership agreement that you have. Thank you.
Adel Al-Saleh: Thank you. Look, on the government business, look the attractive part of the government business is they are quite diverse in their requirements. So you've seen the latest announcement that we put out earlier today, I believe or yesterday around Air Force, it was GEO solution, by the way it's the third iteration of that contract and the customer has an option to go to MEO and even to LEO, but continue to choose a GEO solution that's really fit for purpose for what they do for that particular thing. mPOWER is seeing a very strong demand from the governments. And I was going to say fortunate, but really, it's unfortunate situation where we have to prioritize customers that go in mPOWER and a lot of the prioritization goes to the government. So yes, you're absolutely right in the second half of the year, you will see big ramps going by the government customers into mPOWER. And we're hoping to announce a contract this fiscal, but we will be announcing several contracts over the next several months that will underpin what I'm saying right. So you will see that momentum going forward. And the good news for us is as I described in my opening remarks, we've got two satellites mPOWER going up that helps us with the capacity. Remember, we're operating the constellation at this impaired level right because of the power module failures. That has been very stable for us by the way. Therefore, as we launch 7 and 8 that gives us more resilience, gives us a little bit more confidence in pushing more power through these satellites versus being conservative which gives us more capacity. Then we will add it more with 9 and 10 and 11 going in 2025 or in first half of 2025 that gives us more capacity with then a complete set of satellites through 13 in first half of 2026. So the ramp of that mPOWER constellation will continue to really progress well right for us. And we just look forward to making sure that our constraint now opens up a little bit, so we can bring more customers into this exciting really powerful solution with all the flexibility and the low latency that the constellation provides. The Starlink partnership is going well. I mean we're working with them very closely. In Cruise, we will not disclose financial details, we don't have an agreement with them to be able to disclose it. But if you look at our cruise customers, they're really asking for that flexibility. They want to have dual source on the ship that's able to leverage whatever capacity available both for ship operation, but also for their customer experience. And you can go on some of these large cruise lines websites and see the type of digital experience they're offering their customers, it's really innovative, it's amazing what they're trying to do right both on the ship, but also on shore when they actually get customers going into tours and different events etcetera that uses both capacities and constellation effectively to deliver the type of experience that they need. So that partnership is going very well with us. And of course, we're thinking about expanding broader LEO partnerships right because we are a big believer in this multi-orbit where we have the owner economics between GEO and the NEOs which are very important to us. And of course, a partnership for LEO solution that provides the customers what they need.
Roshan Ranjit: That’s great. Thank you. If I may just push further a bit more understanding, what percentage of your ship base have both solutions on them at the moment please?
Adel Al-Saleh: Look, a lot of their ships have implemented dual solution, right? I don't know the exact percentage, but it's growing, right? So -- but it's interesting to see as it grows, the percentage of the dual sources on the ship, our revenue continues to grow and our margin continues to grow. So that explains the dynamics, right? Which is there is insatiable appetite for bandwidth for broadband on these ships and one solution doesn't fix it, right? So they need both solutions in order to be able to provide that continuous resilient bandwidth. So the penetration of dual source on the ships is growing. I honestly don't know the answer. What percentage of our cruise ships that we serve have dual solutions, but it's growing and growing fast. And we expect it to continue, while our revenue and our profit in our cruise business also continues to grow quite fast. That tells you the dynamics, right, that it's not replacement kind of dynamic, it is complementary and both carriers are getting the volumes that they require.
Roshan Ranjit: Understood. Thank you.
Operator: Thank you. We have came to an end of the question-and-answer session. I'll hand it back over to your host for closing remarks.
Richard Whiteing: All right. Thanks everyone. That concludes this morning's presentation. As always, myself and the rest of the team are available, if you have any follow-ups. Have a great day and enjoy the summer. Thank you.
Adel Al-Saleh: Thanks everyone.
Operator: Thank you for joining today's call. You may now disconnect.
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