Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• SES SA (SGBAF) reported stable revenues for 2024, reaching over 2 billion, which was at the top end of their financial outlook.
• The company achieved a 1% growth in adjusted EBITDA, exceeding expectations and marking a turnaround after nearly a decade.
• SES SA (SGBAF) secured over 1.4 billion in renewals and new customer contracts, supporting a gross backlog of 4.8 billion.
• The company's net leverage remains low at 1.5 times, with 3.2 billion in cash and cash equivalents, maintaining a sector-leading investment-grade balance sheet.
• The acquisition of Intelsat is on track, with detailed plans for synergies and reaffirmed financial objectives for the combined company.

Negative Points

• The fixed data business experienced an 8.7% year-on-year decline due to capacity constraints and competitive pressures.
• The media segment saw a 5.3% decline, in line with expectations, but still a negative impact on overall performance.
• There are concerns about potential delays and cost overruns in the Iris Square project, although protections are in place.
• The company faces increased pricing pressure in the fixed connectivity segment, which could impact margins.
• The Brazilian customer bankruptcy will have a significant one-off impact on 2025 financials, although SES SA (SGBAF) plans to mitigate this through cost management and growth in other segments.

Q & A Highlights

• Warning! GuruFocus has detected 7 Warning Signs with SGBAF.

Q: Can you confirm your intention to return cash to shareholders from insurance proceeds and potential C-band cash proceeds? A: Yes, we intend to prioritize shareholder returns with any excess cash, especially from exceptional proceeds. The FCC is moving quickly to release C-band spectrum, and we will cooperate with them. The exact amount of spectrum to be monetized is uncertain, but we are committed to delivering below 3 times leverage and prioritizing shareholder returns. (Adele Al Saleh, CEO)

Q: Is freeing up more than 100 megahertz of C-band spectrum a realistic proposal, and how should we think about compensation for satellite operators? A: Technically, freeing up more than 100 megahertz is possible, but it requires detailed engineering work. The only precedent for compensation is the previous C-band clearing, and while it's early to speculate, the value of C-band has grown. We need to let the process play out to understand potential compensation. (Adele Al Saleh, CEO)

Q: Can you outline the regulatory process for the Intelsat acquisition and when larger approvals are expected? A: The regulatory process is progressing as expected, with active engagement from major bodies like the US Department of Justice, FCC, and European Commission. We anticipate these processes to conclude in the next few months, aligning with our expectation to close the acquisition in the second half of 2025. (Adele Al Saleh, CEO)

Q: What are the risks of delays or increased costs for the Iris Square project, and what protections do you have? A: We have several terms in the contract to protect against delays or cost increases. The first major milestone, rendezvous one, will confirm schedule, technical requirements, and cost. We have caps on monthly costs and protections if the IRR falls below expectations, allowing for renegotiation if necessary. (Adele Al Saleh, CEO)

Q: Is it possible for SES to renegotiate or walk away from the Intelsat deal under certain circumstances? A: The deal structure is a traditional public company agreement with no unilateral right to walk away. If all conditions are met, both parties are obligated to close. If a party wants to cancel, the other must agree, and a fee of 300 million plus expenses would apply. (Adele Al Saleh, CEO)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.