Eutelsat Communications : Press Release - Third Quarter and Nine Month 2020-21 Revenues

THIRD QUARTER AND NINE-MONTH2020-21 REVENUES

• Full Year revenue objective upgraded, and all other objectives confirmed
• Nine months operating vertical revenues down 3.5%1 year-on-year
• Third Quarter Operating Verticals revenues down 6.1%1 year-on-year, in line with expectations
• Backlog of €4.5bn up 6% and representing 3.5 years of revenues
• Favourable outturn of Spring 2021 renewal campaign with USG
• Progress on our Fixed Broadband strategy

Paris, 11 May 2021 - Eutelsat Communications (ISIN: FR0010221234 - Euronext Paris: ETL) reports revenues for the Third Quarter and Nine Months ended 31 March 2021.

In € millions		Q3 2019-20		Q3 2020-21			Change
	Reported			Like-for-like2
Broadcast	198.8	182.0	-8.5%		-6.8%
Data & Professional Video	44.8	39.5	-11.9%		-6.7%
Government Services	40.0	36.7	-8.1%		-0.3%
Fixed Broadband	18.8	20.5	+9.1%		+1.9%
Mobile Connectivity	20.8	15.7	-24.3%		-17.2%
Total Operating Verticals		323.1		294.4		-8.9%			-6.1%
Other Revenues3	(1.1)	6.9		Na			Na
Total		322.0		301.3		-6.4%			-5.9%
EUR/USD exchange rate	1.10	1.22

Rodolphe Belmer, Chief Executive Officer of Eutelsat Communications, said: "This Quarter has seen some important operational milestones, notably the outcome of the Spring renewal campaign with the US administration well above historical average, while the increase in our backlog reflects our important recent commercial wins. Most notably, we are now seeing real momentum in our Fixed Broadband ramp- up with EUTELSAT KONNECT now at full coverage, enabling us to make tangible progress in Western Europe with retail operations extended to new territories and gross additions gaining pace. Distribution has also been strengthened in Africa, notably with a partnership with Facebook to roll out Express WiFi hotspots across our African footprint.The outturn of our Third Quarter revenues performance is fully in line with our expectations and enables us once again to raise the bottom end of our objective range for the year as a whole, as well as to reconfirm all other elements of our financial guidance. From a strategic perspective, recent weeks have been marked by our entry into the LEO space through our investment in OneWeb, which represents a compelling entry point to address the considerable LEO opportunity as well as an additional growth engine for the Group's connectivity activities".

1. Like-for-likechange.
2. Change at constant currency and perimeter. The variation is calculated as follows: i) Q3 2020-21 USD revenues are converted at Q3 2019-20 rates; ii) Q3 2020-21 revenues are restated from the contribution of Bigblu Broadband Europe to revenues. iii) Hedging revenues are excluded from Other Revenues.
3. Other Revenues include mainly the impact of EUR/USD revenue currency hedging, the provision of various consulting/engineering services and termination fees.

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HIGHLIGHTS

Favourable outcome of the Spring renewal campaign with the US administration with a record-high 95% renewal rate, well above historical average.

€4.5bn backlog up 6% year-on-year and representing 3.5 years of revenues.

Continued progress in our Fixed Broadband rollout:

• KONNECT satellite providing high-bandwidth coverage of Western Europe and sub-Saharan Africa with full coverage now available.
• Progress in Western Europe:

• 1. Retail operations extended to new territories with gross additions gaining pace;
  1. Ongoing wholesale discussions with third-party operators;
  1. Closing of the disposal of our stake in Eurobroadband Infrastructure (EBI) completing the reorganization of our distribution.
• Strengthening distribution in Africa:
• 1. Wholesale agreement with Vox in South Africa;

1. Testing of wholesale distribution with Orange in DRC;

1. Partnership with Facebook to roll out Express Wi-Fi hotspots across our African footprint.

Nine Month Operating Verticals revenues performance enabling us to further raise our objective for the Full Year to between €1,200 million and €1,220 million (versus between €1,190 million and €1,220 million previously).

All other financial objectives for current and next fiscal year confirmed.

Eutelsat has signed an agreement to become a leading shareholder of OneWeb alongside the UK Government and Bharti Global, securing a compelling entry point to the considerable LEO opportunity.

THIRD QUARTER REVENUES4

Total revenues for the Third Quarter stood at €301.3 million down 6.4% on a reported basis and by 5.9% like-for-like.

Revenues of the five Operating Verticals (ie, excluding 'Other Revenues') stood at €294.4 million. They were down by 6.1% on a like-for-like basis excluding a positive perimeter effect of c.0.6 points (integration of Bigblu Broadband Europe) and a negative currency effect of c. 3.3 points.

Quarter-on-quarter, revenues of the five Operating Verticals were down by 3.5% like-for-like.

Unless otherwise stated, all variations indicated hereunder are on a like-for-like basis, ie, at constant currency and perimeter.

Broadcast (62% of revenues)

Third Quarter Broadcast revenues amounted to €182.0 million, down 6.8% year-on-year. They reflect the impact of the renegotiation of contract terms with Greece's Forthnet as well as the anticipated broad slowdown in the pace of new business against the current operating backdrop affecting notably distributors, resulting in lower revenues in Europe. As a reminder Q3 2019-20 also included a positive one-off of circa €1m.

On a quarter-on-quarter basis, revenues were down by 2.8%. The Fourth Quarter is expected to return to stability at a broadly stable level compared to the Third.

4 The share of each application as a percentage of total revenues is calculated excluding "Other Revenues".

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At 31 March 2021, the total number of channels broadcast by Eutelsat satellites stood at 6,864 stable year-on-year and up 4% quarter-on-quarter. The number of HD channels stood at 1,853 versus 1,667 a year earlier, up by 11% and represented 27.0% of channels compared with 24.3% a year earlier.

Data & Professional Video (13% of revenues)

Third Quarter revenues stood at €39.5 million, down by 6.7% year-on-year.

Fixed Data revenues continue to face price pressure, but this is now partly offset by growth in volumes, in particular in MENA and APAC.

Professional Video revenues were once again in decline year-on-year, reflecting structural headwinds in this application as well as the phasing of a specific contract which is detrimental to the Second Half but neutral over the Full Year.

Quarter-on-quarter, therefore, revenues were down by 4.0%.

On the commercial front, a multi-year contract for capacity on the EUTELSAT 172B satellite was signed with New Zealand's Mobile operators to provide 4G mobile backhaul services to Chatham Islands.

Government Services (13% of revenues)

Third Quarter Government Services revenues stood at €36.7 million, down 0.3% year-on-year. They reflected the contribution of the EGNOS payload which entered into service on 15 February last year on EUTELSAT 5 WEST B as well as new business which offset the negative carry-forward effect of USG renewals in 2020 (85% in Spring, 80% in Fall).

Quarter-on-quarter, therefore, revenues were down by 2.3%.

The latest renewal campaign with the US Government (Spring 2021) resulted in an estimated renewal rate of circa 95%.

As a reminder, Fourth Quarter revenues will reflect a tougher comparison basis, as the same period last year included a positive one-off related to the temporary relocation of EUTELSAT 7A.

Fixed Broadband (7% of revenues)

Third Quarter Fixed Broadband revenues stood at €20.5 million, up 1.9% year-on-year. On one hand it reflects the initial revenues generated by Konnect Europe, including the start of the wholesale contract with Orange from 1st January, as well as growth at our African operations. On the other hand revenues reflected the decline in the contribution of EBI carrying the KA-SAT satellite and sold to Viasat on 30 April).

Quarter-on-quarter, revenues were down by 12.9%. As a reminder, the Second Quarter included a high level of terminal sales.

With the EUTELSAT KONNECT satellite now operating with full coverage, the footprint of our European operations has been extended to the full territory in Germany, Spain and the UK and we also launched commercial service in Portugal, resulting in an acceleration of gross additions in the last couple of months. On the wholesale side, several discussions with major operators are ongoing and are progressing well. Finally, with the disposal of our stake in EBI to Viasat now closed, we have completed the reorganization of our distribution.

In Africa we are continuing to strengthen our distribution capabilities, notably through an additional agreement with Vox in South-Africa, the testing of wholesale distribution with Orange in DRC, and the recent agreement with Facebook to accelerate the rollout of Express Wi-Fi hotspots, a proven solution for community Wifi.

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Mobile Connectivity (5% of revenues)

Third Quarter Mobile Connectivity revenues stood at €15.7 million, down 17.2% year-on-year. They continued to reflect the impact of the Covid-19 crisis on Aero Mobility, weighing on airtime-related revenues on KA-SAT, and reducing revenues from certain service providers. Conversely, Maritime revenues remained on an upward trend on the back of the ramp-up of contracts secured in the last couple of years. Revenues were stable quarter-on-quarter.

On the commercial front, following the relocation of the former EUTELSAT 7A satellite, a multi-yearmulti-transponder agreement was signed with Global Eagle for capacity in inclined orbit at the 139°West orbital position highlighting the strength of Eutelsat's in-orbit resources and underlying demand on the Aero Mobility market.

Other Revenues

Other Revenues amounted to €6.9 million in the Third Quarter versus (€1.1) million a year earlier and €6.8 million in the Second Quarter. They included a positive €4.3 million impact from hedging operations compared to a negative impact of (€3.3) million last year and a positive impact of €3.7 million in the Second Quarter.

OPERATIONAL AND UTILIZED TRANSPONDERS

The number of operational transponders at 31 March 2021 stood at 1,366 down by 11 units year-on- year and 14 quarter-on-quarter reflecting principally the end of life in stable orbit of the EUTELSAT 48D satellite.

The number of utilized transponders stood at 950, down 9 units year-on-year basis and by 17 units quarter-on-quarter reflecting principally the same effect as above.

As a result, the fill rate stood at 69.5% compared with 69.7% a year ago and 70.1% at end-Dec. 2020.

	31 March 2020	31 Dec. 2020	31 March 2021
Operational transponders5	1,377	1,380	1,366
Utilized transponders6	959	967	950
Fill rate	69.7%	70.1%	69.5%

Note: Based on 36 MHz-equivalent transponders excluding high throughput capacity

BACKLOG

The backlog stood at €4.5 billion at 31 March 2021 versus €4.2 billion a year ago, and €4.4 billion at end-December 2020. The 6% year-on-year rise reflects the inclusion of the long-term renewal contract with Sky Italia, the wholesale agreement with Telecom Italia and the additional EGNOS payload on the future EUTELSAT HOTBIRD 13G satellite, which are partly offset by natural backlog consumption.

The backlog was equivalent to 3.5 times 2019-20 revenues, with Broadcast representing 64%.

	31 Mar. 2020	31 Dec. 2020	31 Mar. 2021
Value of contracts (in billions of euros)	4.2	4.4	4.5
In years of annual revenues	3.2	3.4	3.5
Share of Broadcast	67%	67%	64%

1. Number of transponders on satellites in stable orbit, back-up capacity excluded.
2. Number of transponders utilized on satellites in stable orbit.

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Note: The backlog represents future revenues from capacity or service agreements and can include contracts for satellites under procurement.

NINE MONTHS REVENUES

Revenues for the first Nine Months of FY 2020-21 stood at €929.9 million, down by 3.0% on a reported basis.

Revenues of the five Operating Verticals (excluding 'Other Revenues') were down by 5.4% on a reported basis and by 3.5% like-for-like, excluding a positive perimeter effect of c.0.5 points (integration of Bigblu Broadband Europe) and a negative currency effect of c.2.3 points. At a 1.14 €/$ rate (rate as per financial objectives) they stood at €920.3m.

In € millions	9m 2019-20	9m 2020-21		Change
Reported	Like-for-like7
Broadcast	588.1	560.9	-4.6%	-3.5%
Data & Professional Video	132.6	120.9	-8.8%	-5.2%
Government Services	118.3	113.6	-3.9%	+1.6%
Fixed Broadband	57.9	62.6	+8.1%	+2.2%
Mobile Connectivity	62.0	49.6	-20.0%	-14.9%

Total Operating Verticals	958.9	907.5	-5.4%	-3.5%
Other Revenues	(0.2)	22.3	NR	NR
Total	958.7	929.9	-3.0%	-3.1%
EUR/USD exchange rate	1.11	1.18

FINANCIAL OUTLOOK

On the back of our revenue performance of the first Nine Months, we are once again raising the bottom end of our FY 2020-21 revenue objective range (for the five Operating Verticals) to between €1,200 million and €1,220 million, versus between €1,190 million and €1,220 million previously8.

All other elements of the financial outlook are confirmed:

• Adjusted Discretionary Free Cash-Flow of €390-420 million9 in FY 2021-22
• Average Cash Capex10 not exceeding €400 million per annum for the period July 2020 to June
  2022.
• LEAP 2 plan aimed at generating €20-25 million in annual savings by FY 2021-22.
• Commitment to a sound financial structure to support our investment grade credit ratings, targeting a medium-term net debt / EBITDA ratio of around 3x.
• Stable to progressive dividend policy based on the dividend of 0.89 euros paid in November 2020.

This outlook is based on the nominal deployment plan outlined hereunder.

7 Change at constant currency and perimeter. The variation is calculated as follows: i) 9-months2020-21 USD revenues are converted at 9-months2019-20 rates; ii) 9-months2020-21 revenues are restated from the contribution of Bigblu Broadband Europe to revenues. iii) Hedging revenues are excluded from Other Revenues.

1. Based on a €/$ rate assumption of 1.14 and including the combined impact of the acquisition of Bigblu Broadband Europe and the disposal of EBI but excluding the effect of other changes in perimeter if any.
2. Based on a €/$ rate assumption of 1.14, excluding one-off impacts such as hedging, effects of changes in perimeter other than the acquisition of Bigblu Broadband Europe and the disposal of EBI, and one-off costs related to specific projects in particular to the LEAP 2 program and to the move to new headquarters.
3. Including capital expenditure and payments under existing export credit facilities and other bank facilities financing investments as well as payments related to lease liabilities.

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