Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SES SA (SGBAF, Financial) reported half-year revenue and adjusted EBITDA fully in line with projections, with adjusted EBITDA tracking to the upper half of the range.
- The networks business showed strong performance, accounting for over 54% of total revenue, with significant wins in the government sector and strong growth in the cruise segment.
- The successful launch of ASTRA 1P in June is expected to sustain long-term cash flows for the Media business, serving almost 120 million households.
- The transformational agreement to acquire Intelsat is expected to create a stronger multi-orbit operator, enhancing competitive positioning and driving value for stakeholders.
- The company has a strong balance sheet with over EUR2 billion in cash, and has confirmed investment-grade ratings from Moody's and Fitch post-Intelsat acquisition announcement.
Negative Points
- The media segment faced headwinds, particularly due to a significant impact from a customer bankruptcy in Brazil, which is expected to result in lower revenue in 2025.
- Fixed data revenue declined by 15% in Q2, impacted by lower revenue from Europe and Asia, and the company is facing challenges in this segment.
- The company expects a 5% impact on media revenue in 2025 due to the Brazilian customer issue, which will be on top of the mid-single-digit decline already anticipated.
- Despite strong performance in networks, the company faces structural headwinds in mature markets like North America and Asia, particularly in the media segment.
- The company is undergoing a significant integration process with Intelsat, which involves regulatory clearances and detailed integration planning, posing potential execution risks.
Q & A Highlights
Highlights of SES SA (SGBAF) Half Year 2024 Earnings Call
Q: Regarding the impact from the Brazil customer in 2025, is mitigation all about cost savings, or are there other ways to recapture some of that lost revenue?
A: Primary focus is on cost savings, which we control well. Additionally, we will drive incremental revenue activities to secure additional growth and revenue. (Adel Al-Saleh, CEO)
Q: Can you give a rough idea of how much cash repayments related to C-band costs might land in the second half of '24?
A: We expect to receive over $200 million in Q3, with another $200 million to be realized in subsequent quarters of this year and during 2025. (Sandeep Jalan, CFO)
Q: Can you give us an idea of the cost of the EUR2.1 billion bridge facility and the $1 billion five-year term loan related to the Intelsat deal?
A: The entire financing is fully unsecured. The $1 billion term loan is at very competitive rates and remains within the total financing cost range of $325 million to $350 million for the combined company. (Sandeep Jalan, CFO)
Q: Can you clarify if "video" and "media" mean the same thing, especially regarding the impact of the Brazilian customer's bankruptcy?
A: Yes, "video" and "media" are the same. The impact of the Brazilian customer will be a 5% headwind to media revenue. (Adel Al-Saleh, CEO)
Q: Can you expand on the change in accounting treatments of orbital slot license rights that led to higher depreciation and amortization?
A: We have reassessed our position and are now amortizing certain orbital slot rights, which were previously not being amortized. This change reflects an impact of about EUR29 million. (Sandeep Jalan, CFO)
Q: What drove the acceleration in the decline in Q2 video revenue, and how should we think about SES video revenue trends into '25?
A: The decline was primarily due to the impact of the Brazilian customer. We expect mid-single-digit declines for 2024 and an additional 5% impact in 2025. (Adel Al-Saleh, CEO)
Q: Can you maintain the rate of growth in the government segment for the remainder of the year?
A: We expect the government business to continue delivering mid to high single-digit revenue growth, driven by strong demand from US and international governments. (Adel Al-Saleh, CEO)
Q: Can you detail the reasons behind the 15% decline in fixed data in Q2 and if this will reverse in the second half?
A: The decline was due to difficult revenues in Europe and one-off revenues in the prior year. We expect some uplift in Q3 and further ramp-up in the second half of the year. (Sandeep Jalan, CFO)
Q: Can you give us a sense of how the mPOWER backlog has been trending and how many contracts you expect to sign for the rest of the year?
A: We expect strong demand from government customers for mPOWER in the second half of the year and will announce several contracts over the next few months. (Adel Al-Saleh, CEO)
Q: Any color on the progress of the Starlink partnership and its revenue contribution?
A: The partnership is going well, particularly in the Cruise segment. We are not disclosing financial details but expect the dual-source solution to continue growing. (Adel Al-Saleh, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
