Revenue: Stable year on year, with network growth of 8.4%. Adjusted EBITDA: EUR280 million, broadly stable year on year with a 55% margin. Net Leverage: 1.2 times, including EUR3.1 billion of cash and cash equivalents. New Contracts and Renewals: EUR360 million secured, supporting a gross backlog of EUR4.5 billion. Government Business Growth: Up more than 13% year on year. Mobility Business Growth: Almost 9% year on year, with double-digit growth in Aviation. Fixed Data Business: Down 2% year on year. Media Business Decline: Minus 10.6% year on year. Adjusted Net Profit: EUR42 million, reflecting higher depreciation and amortization expenses. Adjusted Free Cash Flow: Negative EUR51 million, due to front-loaded CapEx. CapEx Guidance: EUR425 million to EUR475 million for full-year 2025. Dividend: EUR0.25 per A-share paid, totaling EUR1.3 billion in shareholder returns since 2021.

Warning! GuruFocus has detected 9 Warning Signs with SGBAF.

Release Date: April 30, 2025

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

Positive Points

SES SA (SGBAF) reported a solid start to 2025, with stable revenue year-on-year and strong operational execution. The company secured EUR360 million in renewals and new customer contracts, supporting a gross backlog of EUR4.5 billion. SES SA (SGBAF) is progressing well with the Intelsat acquisition, expected to close in the early part of the second half of 2025. The O3b mPOWER constellation deployment remains on track, with satellites 7 and 8 entering commercial operations in May 2025. The company continues to see strong growth in its Government and Mobility segments, with Government business up by more than 13% year-on-year.

Negative Points

The Media business continued to decline by 10.6% year-on-year in Q1 2025, impacted by capacity optimization and SD channel switch-offs. Fixed Data business is down 2% year-on-year due to capacity constraints and competitive pressures. Adjusted free cash flow for Q1 2025 was negative EUR51 million, primarily due to front-loaded CapEx for satellite programs. The company faces challenges in balancing investment in new projects like IRIS while maintaining cost efficiencies. There is uncertainty regarding the potential impact of US space budget cuts and regulatory changes on SES SA (SGBAF)'s operations.

Q & A Highlights

Q: Can you help us frame the potential opportunity available to SES as a result of the sharp rise in European defense budgets? Have you been involved in any discussions with policymakers so far? A: We see increased demand in Europe for defense spending, with nations bolstering their future investments. Budgets are being finalized, and we expect increased demand in the mid to long term. Recent articles, such as one from the German Ministry of Defense, highlight the importance of multi-orbit architectures, which aligns with our offerings. We anticipate robust and sustainable demand growth as these budgets are deployed.

Story Continues

Q: Your first-quarter results were supported by strong cost control. How much scope do you have to continue capturing these cost efficiencies? A: Cost control is a critical element of our strategy. We see room to execute cost initiatives, making us leaner and more efficient. The SES and Intelsat combination offers significant synergy opportunities. We aim to balance investment and cost controls, ensuring efficiency while investing in projects like IRIS.

Q: On the potential upper C-band disposal, do you have any updated views on the amount of spectrum that could be offered? A: The FCC aims to clear as much C-band as possible, and we have experience in this area. Technically, clearing 100 megahertz is feasible, but it depends on FCC's strategy. We are committed to protecting our clients and services while working with the FCC to find a solution.

Q: When will you have capacity on MEO to serve your Fixed Data customers better so that this vertical can return to growth? A: We expect a 30% capacity increase in May with the launch of mPOWER satellites 7 and 8. Additional capacity will be available with satellites 9 to 11 in 2026 and satellites 12 and 13 in 2027. This will support growth across all segments, including Fixed Data.

Q: Regarding the SD channel switch-offs, is this just a negative one-off factor in 2025, or could it spill into 2026? A: The SD channel switch-offs were anticipated and aligned with contract renewals. While impactful in 2025, future switch-offs will not be as significant. We expect Media to return to a mid-single-digit decline trajectory post-2025.

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

This article first appeared on GuruFocus.

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