Earnings Call: H1 2021

Aug 4, 2021

Hello, and welcome to the FES twenty twenty one Half Year Results Conference Call for Investors and Analysts. My name is Jess, and I'll be your coordinator for today's event. For the duration of the call, your lines will be on listen only. However, there will be the opportunity to ask questions. I will now hand you over to your host, Richard Whiting to begin today's call. Thank you. Good morning, everyone, and thanks for joining our investor and analyst results call for the half year ended 30 June 2021. This morning's presentation was uploaded along with the press release to the Investors section atses.com if you don't already have it. As always, please note the disclaimer at the back of the presentation. In a moment, Steve Colla, CEO, will present the main business highlights followed by Sandeep Jalan, CFO, to cover the financials in more detail. After some closing remarks from Steve, we'll be happy to take your questions. We're also joined from the U. S. By JP Hemingway, CEO of SES Networks. So with that, let me hand over to Steve. Very good. Thanks, Richard, and good morning, everyone, and thanks for joining us. So I'm going to be starting with Page 3, and our good start to 2021 has continued into the Q2. We've delivered a solid first half in video on the back of important long term renewals across our core neighborhoods, expanding our market leadership in high definition and good progress in consumer, all of which has contributed to an improved top line trajectory. In Networks, we've maintained revenue year on year in the face of the extended COVID environment. We do see good signals that the market is picking up and government has been particularly strong through period, growing double digit. We continue to execute strongly in the business with a 5% year on year reduction in recurring operating expenses, a significant reduction in interest costs and a reduction in net debt by almost $400,000,000 And our progress through the first half means that we're on track to deliver our 2021 revenue. We got more than 90% of our revenue outlook already signed, while laser focus on reducing costs means that we're raising the low end of our adjusted EBITDA outlook. So then with respect to C band, we remain fully on track to achieve the Phase 1 clearing deadline at the end of this year and the first $1,000,000,000 in accelerated relocation payments. The recent issuing of C band licenses and the support of the major licensees to efficient reimbursement process means that we expect to start receiving cost reimbursement in the coming months. And then last but not least, we've returned €275,000,000 of cash to shareholders this year through a combination of dividend and share buyback, and this underscores our commitment to delivering sustained shareholder returns. So turning to the key financial highlights on Page 4. Revenue of €875,000,000 and adjusted EBITDA of €544,000,000 were solidly in line with our expectations. €526,000,000 in video revenue delivered reflects the improved trajectory, down 3.9% year on year through the first half versus 8% previously and consistent with our conviction of flattening the curve over the medium term. €349,000,000 year to date in Networks is flat year on year, which we're pleased with given the ongoing COVID headwinds. Cruise lines are returning to business. Aviation is picking up, driven by the U. S. And we've seen increased deal flow in the last few weeks across the board. Pleasingly, the strong focus on execution and the measures implemented a increase in EBITDA margin to 62%. Given our solid adjusted EBITDA through the first half, we're increasing the low end of our 2021 EBITDA outlook by €20,000,000 with the range now €1,080,000,000 to €1,100,000,000 So now then turning to Page 5 and on the video side, we've concluded over €250,000,000 of renewals and new business in the first half of twenty twenty one, building on the 6 $50,000,000 of backlog signed during 2020. In Europe, we saw Sky and a number of major public broadcasters extend their business with us, particularly at 19.2 and 28.2 East, the jewels in our network and among the most valuable video neighborhoods globally. Pricing trends are flat to increasing, reflecting the value that we deliver to our customers' businesses. Importantly, we also extended our relationship with Comcast who serve millions of cable homes in the U. S, while also facilitating the accelerated clearing of spectrum to support the FCC process through the implementation of more efficient transmission. We talked previously about our leadership in both the total number of channels carried across the SES neighborhoods and the number of HD channels carried. And pleasingly, this leadership widened through the addition of 2 25 channels in high definition, up 8% year on year to more than 3,100 in total. Satellite remains the most efficient, reliable and cost effective platform for broadcasters to distribute their most valuable content to consumers around the world. Good momentum and a positive trend in HD plus in Germany, but I'll skip over that for a second to the recent launch of HD Plus in Ghana and an exciting world first as SES and HD Plus Ghana was the first business to transmit ultra high definition in Africa, transmitting both semifinals and the finals of the European Championships for HD plus subscribers in collaboration with Samsung. Exciting developments regardless of whether you were on the right or the wrong side of the result. And sticking with the theme of sports, our Sports and Events business is back to pre COVID run rates and picking up nicely. So then turning to Page 6, and HD Plus provides us with direct access to consumers in Germany and is an increasingly important contributor to our most valuable neighborhood. The business is growing again with important growth in the number of registered subscribers, while a price increase implemented earlier this year is contributing to higher year on year revenue. As trailed last time we spoke, we'll be expanding our HD Plus portfolio over the next few months, starting with the launch of HD Plus TO GO. For just an additional €5 per month, HD plus subscribers will be able to take their HD plus subscription mobile with access to over 100 channels on their mobile devices using the HD plus to go app. The app will launch in Q4. I've already got the pre launch version on my phone. It's pretty cool. And for those interested and want to improve your German, we've included the link to the commercial in the deck. And this will be followed early next year with an IP version of HD plus and that will be accessible to the 19,000,000 non satellite households in Germany, substantially increasing our addressable B2C market. So, so much for video. And now shifting to Networks on Page 7, and it's worth noting that we've been in a COVID environment now for almost 18 months, a period that's had profound impact on Cruise and Aviation, and these segments for the 3 years prior to COVID were our fastest growing. In that context, we're pleased with the year on year revenue holding firm and the standout performers, definitely the strong growth in our government business, up 13% sorry, up 11% year on year on the back of strong demand from the U. S. And other governments for the multi orbit solutions that we offer, anchored particularly with our unique O3B infrastructure. I would note that I'm really excited by the engagement that we're seeing from governments around the world in MEO in advance of the launch of O3b mpower later this year. On the fixed data side, we saw a modest contraction in the 1st 6 months, driven by expected lower volumes in the Pacific following the deployment of a number of cable systems, but we continue to see growth from rural inclusion projects and continued success of broadening our relationships We're also We're also excited to add AWS to our 1 hop to the cloud connectivity services, delivering a multi cloud environment for our customers. Notwithstanding COVID headwinds, our mobility sector is picking up with a return to sailing for the cruise sector. We deliver the best solutions for cruise in the industry. And then with O3BN Power still a year away from commercial launch, we've already secured over $300,000,000 in backlog from cruise alone. We're making good progress in replicating the success in cruise into the government sector with Navy and have a number of demonstration services ongoing across multiple naval fleets that we expect to transition onto O3M Power. And that's a nice segue to Page 8 and our view of how we see the market in networks dividing and where we believe we have a sustaining right to win with our unique multi orbit cloud enabled architecture. So this graph shows on the X axis increasing throughput per site and on the Y axis increasing flexibility whether the demand is essentially fixed geographically or varies over time or location. And so if we sort of start bottom left, services such as consumer broadband and traditional VSAT need relatively small amounts of bandwidth into relatively fixed sites. This is a large market. It's actually the largest on this graph, and that's where you'll find consumer broadband and providers such as Viasat and H and S, but also where we see the LEO's focus such as StarLink as their architectures lend themselves towards low throughput and low mobility. We focused our assets around high throughput and high flexibility. This is where you'll find segments such as crews, but also important government requirements such as ISR and Navy, and we're particularly strong here. We're close enough to the earth to solve for latency, but far enough away to allow us to deploy power and bandwidth flexibly to address the changing nature of demand in cruise, aviation and government as well as the higher throughputs for sell backhaul, trunking and fiber restoration. We overlay this with a coherent geo fleet and create seamless interoperability between them. And this will be made super powerful with the addition of O2BN Power, 5,000 beams per satellite and terabit per second throughput. With O2BN Power, we're launching 2nd generation network before others have deployed their first, and our network is designed to address the more profitable network segments with a sustaining value proposition. And to underpin this, we've signed $210,000,000 in backlog for SES-seventeen and O2B Empower since the start of the year and total backlog now stands at $770,000,000 for the combination, approximately a year ahead of commercial service. And finally for me on C band and the summary is that we're fully on track. Everything remains green with respect to Phase 1 clearing. We've completed the satellite transitions and we're substantially through the filter installations. Phase 2 also remains fully on track with satellites well under construction. And with the issuing of CBAM licenses, we expect the reimbursement expenses to start flowing in the coming months. So we continue to make excellent progress with the project that will obviously deliver substantial value for SES shareholders. And with that, I'll hand over to Sandeep. Thanks, Dave. Good morning, everybody. We are very pleased with the solid start to 2021 as shown by our first half financial results. Our revenue is fully in line with our expectations and we are improving our adjusted EBITDA outlook for 2021 at the low end by €20,000,000 on the back of both revenue performance as well as cost reductions. Net profit is up 35% year on year. Net debt reduced by almost €400,000,000 and we have also continued to bring down our financing costs significantly by about €45,000,000 per year. We have also distributed €275,000,000 of cash to our shareholders during first half of this year, which includes €94,000,000 of share buyback, which was completed recently and a total of 12,000,000 A shares and FDRs and 6,000,000 B shares were bought back at average price of €6.56 and €2.62 respectively. Turning to the results in more detail and starting with adjusted EBITDA on Page 11. Adjusted EBITDA for the 1st 6 months of 2021 stood at €544,000,000 and represented an improved margin of 62.2% compared to 61.4% a year ago. This reflects the combination of solid revenue performance and a 5% year on year reduction in OpEx with the benefit of last year's Simplify and Amplify program. At the revenue level, video continue to deliver an improved performance where the reduction of 3.9% year on year compared with minus 8% that we have recorded during first half of last year. This is thanks to our pricing power and our unique video neighborhoods as well as our growing B2C business of Edgy plus in Germany where we also implemented recently 7% price increase. In networks, our flat performance versus first half of last year is evidence that even in the challenging COVID environment, our unique infrastructure continues to deliver customer value especially in government segment where we achieved growth of 11.3% year on year. This has mitigated the impact of COVID on mobility, which not surprisingly declined by about 10% year on year with a lag effect after a double digit percentage growth during last year as well as lower fixed data revenue in this period. The long term prospects in networks continue to remain strong and we are very well placed to grow, thanks to our unique assets and capabilities in network, which is well set to capture the massive growth in connectivity demand and is also set to benefit as the recovery from COVID start to set in motion. I will now move to Page 12, which explains the net profit Adjusted net profit for the first half of the year stood at €152,000,000 which is an increase of 35% compared with the first half of last year where the lower adjusted EBITDA of €38,000,000 which includes €24,000,000 from ForEx effects as explained on the previous slide and this was more than offset by 3 main positives. First, depreciation amortization was lower by about €32,000,000 or 9% year on year. 2nd, I'm very pleased with the progress we are making to reduce our cash cost of financing. The refinancing actions contributed to an interest expense reduction of €15,000,000 in first half P and L and our about €30,000,000 annualized, which is about 20% reduction compared to first half of last year. And by the way, this represents only the savings in the cost of our senior debts. On top, there are also tangible cash cost savings of about €15,000,000 per year from the recent tender of our 2022 hybrid bonds with a combination of new hybrid €625,000,000 and a tap of our euro bonds 2026 for €150,000,000 which was done at our historically lowest ever cost of 0.21 percent. And this savings $30,000,000 plus $15,000,000 respectively, they really expand our free cash flow generation potential of the company significantly for the benefit of our shareholders. And the 3rd main positive comes from the ForEx gain of €20,000,000 compared with a loss of €12,000,000 in the prior period. And this ForEx gain is mainly linked to certain intercompany non euro denominated flows. Reported net income of €137,000,000 for first half of this year compares to €86,000,000 in first half of last year and includes a few exceptional items. These comprise restructuring charge of €6,000,000 and net C band charges of €12,000,000 and related tax benefits on these exceptional charges. And this is fully in line with our guidance. Our reported earnings per share was also higher than prior period at €0.25 Turning now to the balance sheet on Page 13. Our continued strong focus on free cash flow generation led to the adjusted net debt being reduced by about €400,000,000 or about minus 10% compared to 30th June 2020. At the same time, and as I mentioned earlier, we have also reduced our average cost of financing from 3.5% to 2.8 percent which is about 20% reduction with the benefit and cash annual cost of about €45,000,000 as I explained earlier and this expands the free cash flow generation potential. As shown by the chart on the right, our weighted average debt maturity profile is very healthy at an average of 7.6 years and you can note that there is no significant senior bond maturities coming due over the next 2 years. Moving to the CapEx forecast on Page 14, this is totally unchanged. Our robust cash flow will be able to support the growth investment of 2021 2022 with no major financing needs. After the growth CapEx peak of this year and next for S year 2017 and O3B Empower, our cash flows will not only benefit from the growing revenues and EBITDA generated by these highly differentiated assets, but also from the significantly lower level of CapEx needs beyond 2022, which is at around €375,000,000 per year during the period from 2023 to 2025. More importantly, after this investment peak cycle of €2,670,000,000 we would have completed both our most of our growth investments and major satellite replacements, meaning that we will then enter a sustained period of limited CapEx and higher free cash flow generation. Turning now to the financial outlook on Page 15. We are on track and continue to expect 2021 group revenue to be between €1,760,000,000 to €1,820,000,000 of which more than 90% has now already been contracted. Our focus is to continue to execute across the business and deliver the growth in group revenues between first half of the year and second half that is implied in our outlook where we expect some reduction in video during quarter 3 quarter 4 to be offset by new wins in network. So with revenue on track and our solid performance and reducing year on year OpEx, we are also raising the low end of our adjusted EBITDA outlook by about €20,000,000 So our 2021 revised EBITDA now stands at €1,080,000,000 up to €1,100,000,000 Positive developments continue also on C band front. The reimbursement process is now set in motion with the issuance of licenses by SEC as well as Clearing House being in place with a defined reimbursement process. Billing statements have been submitted to Clearing House for reimbursement, which we'll expect to start and receive the monies within this year. We are well set to the 1st clearing milestone later this year which will allow us to receive the first proceeds of $1,000,000,000 which will be fully utilized to strengthen the balance sheet. With this now, hand back to Steve to conclude. Very good. Thanks, Sandeep. And I will end on Page 17. And this is a slide that we showed last quarter and it provides a picture of how we expect our business to develop in the coming years. As we continue to flatten the curve in video and launch SES-seventeen O2B mPOWER to support networks growth, we'll see top line and EBITDA growth coming through from 2023, while beyond our investment will allow the business to drive strong cash flows on a sustaining basis augmented by $3,000,000,000 in accelerated clearing proceeds in late 2023, all of which focused on driving substantial value for SES shareholders. And so with that, Richard, I think we're ready for questions. Great. Thanks, Steve. I think, yes, go ahead, operator. Thank you. And the first question comes from the line of Sami Kassab from Exane. Please go ahead. Good morning, gentlemen. Good morning, everyone. A few questions, please, to start. What is driving the growth in International Video Markets? Can you elaborate on that please, Steve? Is it pricing? Is it volume going up? And do you think video revenue growth in these emerging markets is sustainable over the next 2 to 3 years? Or is it more due to a specific contract renewals that you're seeing growth in 2021? Secondly, what's the outlook for fixed data? When do you expect it to return to growth, please? And lastly, can you provide an update on the revenue impact you expect from the QUATSAT satellite renewal? Thank you. Great. Thanks, Sami. So yes, I mean, growth video, I would say we're doing well in Africa. So we're making good progress in Africa. We have built a neighborhood in Ethiopia at 57 East, and so that's kind of an important neighborhood for the future. I would say Asia continues to be a good market for us, supported by what you probably saw a couple of days ago, a strong renewal in India to support the significant business that we have there. And I would say Asia continues to be, again, a good market where we've seen some good renewals and also a little bit of new business coming from the Asia market. So I would say we're relatively modest in our expectations for growth in the emerging markets. We do have some promising developments also in Latin America, where we see a little bit of progress. But I would say our sustaining. I'll hand to JP in a second on fixed data just to cover the KET SAT question. So yes, we have a renewal coming up on CAT Sat towards the end of this year. I won't say too, too much about it, but I think we as we have discussed before with CL and CAT Sat and the relationship with EchoStar, I think we see that declining over time. But nevertheless, we have some very nice business on CAT SAT in Mexico, which we extend expect to extend for the long term. JP, on fixed data? Yes, Steve. Sure. And good morning, everybody, and good morning, Sami. So on fixed data, obviously, looking back to 2020, we actually had a really solid performance. It's actually exceeded our expectations. And in 2021, so far, we've been seeing really sort of mixed trend among the regions, some really, really solid performance in the Americas and Asia and some softness that we knew would be in place in the Pacific region, as Steve mentioned, around where some of the submarine cables are coming to some of the island territories that we've had for many years. We expect that sort of mix performance across the regions to continue through the remainder of this year, some over performance in those strong regions and managing the softness in the other regions. So we would expect the real performance to pick up in fixed data as we get the fantastic new assets that we have coming to market in 2022 and beyond, where we really get to leverage the SCS-seventeen and 03B Empower, which provide fantastic capabilities for the fixed data market. Thank you very much, gentlemen. The next question comes from the line of Alexander Peterc from Societe Generale. Please go ahead. Yes, good morning and thanks for taking my question. I have 3. One is on your guidance upgrade. If you could clarify what is driving your EBITDA to upgrade precisely? Is it more cost cutting for better savings? Or is the better mix with the video tracking slightly stronger and networks a bit weaker so far this year than you were modeling originally? And then the two questions on the divisions. So just in video, if you could remind us what is the proportion of HD plus new video revenue base? And on Networks, I'd just like to understand if the midpoint of your guidance range is still realistic. If I calculate it right, you Compared to first half of this year, as Steve talked about. But on the other hand, in network, we continue to expect revenues to grow as JP was just talking about. So this mix overall, we expect our revenues to continue to grow. That's first plus for second half of the year. 2nd, we are continuing to perform well on the cost reduction front. We are putting a laser focus across our businesses in terms of cost attention. Also making sure that this ramp up of Simplify and Amplify program gains are continuing to ramp up and we see pretty decent progress as you can see in our results for half of this year. This program was launched just 1 year back and we can already see a good decent ramp up in these gains. Of course, the COVID related savings that we had last year, they will continue to go down. But clearly, the mix is that cost savings continue on track, revenue will continue to grow. And with this, we feel pretty confident to upgrade the guidance for the full year. First half of the year EBITDA was €545,000,000 and you can see that from the full year guidance, the second half despite the revenue growth, we are implying an EBITDA at the midpoint range of very similar magnitude. Great. Thanks, Sandeep. So on HD Plus, look HD Plus from a revenue standpoint is about EUR 120,000,000. It's sort of nicely profitable, positive momentum. I mentioned the new products that we're going to be launching. So very important part of the overall 19.2 neighborhood and the German business. So good prospects for HD Plus in Germany going forward. And then look, on guidance, I don't want to get too far into sort of high and low end. We obviously give a range for a reason. I would say on the video side, we're obviously tracking more towards the top end. Think on the network side, we're obviously tracking more towards the lower end. And that probably just reflects the fact that COVID has gone a little bit longer than we would have liked, I think probably to be higher. We would have needed a faster recovery. We are where we are nevertheless. On the overall revenue, I think we feel very comfortable. And obviously, with the upgrade on the Alexander, hopefully, we answer your questions. Brilliant. Thank you very much. The next question comes from the line of Giles Thorne from Jefferies. Please go ahead. Thank you. My first question is on video. We've now got the Sky Q via IP product launched in Germany, which looks and feels very similar to the same products launched in the U. K. And Italy. But there is some commentary that SKYY DOUGHLIN would be, I don't know if they're incentivizing, but they're certainly allowing existing Sky customers over cable and satellite to move to the IP product. So I guess it would be useful, Steve, to hear your comment on how you see Germany evolving over the next 3 years when it comes to distribution of video content? 2nd question is back to JP and the comment around submarine cables coming to certain islands. This is stimulating a memory at the back of my head around the early 03B contract wins with customers out in the middle of the Pacific Ocean. Can you confirm that it's that business that you're losing to submarine cable? And then my third question is back to video and HD plus As I remember, HD plus was a very market specific and very elegant solution to the distribution of HD in Germany. I suppose each market is different, but my broad question is, where can you see such a similar I mean, we've got the Ghana news now, but where else could you see this model as being relevant to the overall cultivation of HD in other markets that you're in? Thank you. Great. Thanks, Giles. So yes, look, I mean, I'm super optimistic in about Germany in general. I mean, if you look at the overall market, sort of 36,000,000 TV households, half of which are satellite households, the other half approximately are sort of non satellite households. And in the sort of $17,000,000 $18,000,000 that we serve over satellite, we've got this very, very kind of rich and diverse broadcast market with very strong public broadcasters with a significant mandate to carry sort of well liked content for everyone in the country, 2 very strong commercial broadcasters in RTL and ProSieben, Sky, obviously the pay TV platform and then also our own HD plus B2C service. So really robust and interesting market. You sort of touched on Sky. I think Sky reflects so first of all, Sky a fantastic example, I think, in the broadcast industry of a business that has evolved itself into the hybrid environment and sort of developed great technology with Sky Q. They're a very strong partner for us. We really like what they're doing, sort of hybridizing their environments. But satellite is the sort of the key enabler of that hybrid environment both in the U. K. And in Germany. So I think what they're doing is extending their attractiveness in the market and that can only be very good news for SES. And indeed reflects what we're doing with HD plus He should have mentioned there's some parallels there. I sort of agree. I really like the mobile app that we're launching in Germany. I think we're learning a ton through the sort of delivering B2C services, and I think that will also serve well as we think about additional services, whether that be audience measurement or others that we can introduce as we have a kind of a direct touch to consumer. And with sort of 2,000,000 consumers on HD Plus, I think that bodes very well. So I'm optimistic about Germany, and I think we've got some really interesting things to say in that market. And I'm actually very positive about the developments with Sky. And to take your third question on HD plus in other markets, yes, I mean, so what would the conditions need to be for HD Plus in other markets? I think firstly, a strong free to air neighborhood, which is definitely the case in Ghana. And value add that we can deliver through, in particular, the integration of our operator app into TVs, and that's something we've also successfully achieved in Ghana, particularly with the partnership with Samsung. And so if you buy a Samsung TV in Ghana, much like in Germany, it comes with HD plus installed as an operator app and that makes the sort of the route to HD plus a very simple one. So I think there are other markets where we think HD plus could be relevant. I think, like I said, we've learned an awful lot and we've developed a lot of technology through delivery of services in Germany with HD Plus. And I think that consumer interface, if you think about other businesses in other industries that are growing and growing fast, it's really they grow on the back of a strong consumer interface, and that's something that we will continue to think about within our video business. So with that, JP, maybe take the question on the Pacific. Yes. So on the Pacific Islands, Giles, it is the connectivity that we have been providing to those island nations, and it has been a fantastic market and remains a very good market for us in the Pacific region. If you recall, we were effectively being the primary Internet connection service and 4 gs enabler for those islands, and we continue to be so for many of them. Some of those island nations have had 1, 2 or even 3 submarine cables come to those islands. So we've tended to shift to more of a resilient support mechanism to those islands over time, and some of them have reduced their sort of total capacity as a result. But as I say, in other islands, we still remain the primary Internet and primary connection for 4 gs. What's really interesting is around nPower, And we're in advanced conversations with a number of the Pacific Island nations to provide nPower to some of what they call the outer islands, given the lower cost terminals and more flexibility that we have. So we can distribute the Internet and distribute the 4 gs backhaul into more of the island nations that we have. So there's really good potential there and actually really interesting opportunities to do submarine cable restoration in and around those nations given the super high throughput that Empower enables that can get up to gigabits and 10 gigabits of restoration, which makes us very relevant in that market going forward. So expect to see some good growth in the future. Understood. Thanks a lot, guys. The next question comes from the line of Nick Dempsey from Barclays. Please go ahead. Yes. Good morning guys. I've got 3 left. First one, what could potentially delay you or derail you in your 2023 deadline for C band clearing? Now how reliant are you on what others are doing and whether they stick to that time frames for that deadline? 2nd question, in terms of the backlog for Empower and SCS-seventeen, I listened, I appreciate that government won't commit ahead of a launch. We know that from the past. But can you give us any color on the kind of scale of business with government that you've been discussing so that we can kind of fill in the imaginary sort of backlog from government? And the third question, you already answered, Sami, on KET SAT, but what other factors are there in the second half of twenty twenty one that are likely to make video organic revenue growth year on year worse in that period than first half? Thanks, Nick. So C band 2023, look, I mean, we continue to make really, really good progress. The 2023 for us is about launching satellites and reinvigorating the neighborhoods with those satellites. And it's really going very well. We've got 6 satellites under manufacturer with 3 different manufacturers, 3 different launch vehicles. So we've really derisked, I would say, the program completely. We've got a lot of margin in the schedule. We're learning a lot through the deployments, obviously, in Phase 1 in terms of customer clearing. So I think we feel like we can probably go even a little bit quicker in the second phase as a result of that. So yes, I mean nothing but good things to say, to be honest, Nick. It's still a little bit away away. It's a complex series of transitions. We're working very hard with our customers to make sure that they feel supported. The renewal with Comcast was very important, both from the perspective of Phase 1 and Phase 2. So it's really, really good to see that. But yes, I mean, couldn't always want to stay fairly humble around this thing because it's obviously a very important program for us, but hard to imagine that it could be going better at this point in time with respect to clearing. On the second half in video, yes, look, I mean, we've had a very good first half. We knew that there was going to be a little bit of sort of positive tailwinds with some business that we signed in Germany, a little bit of business also in the U. S. Ahead of some of the C band transition. So we get a bit less of that in the U. S. With the sort of the transitions completed and with some more efficient coding and modulation. So I'd say probably that's the one thing I'd point to, Nick, is U. S. Video in the second half will probably come off a little bit. But like I said, I mean, I think we're happy with the performance of the Video business trending towards the high end, and that's our expectation for the second half. And then JP, do you want to take the question on government? I don't think we're going to be tracking imaginary backlog as a metric, Nick, going forward, but JP can certainly take the question on where we are with government. Yes, Nick. As Steve says, we won't be sort of articulating what orders may be that we haven't received in a majority backlog, but I get the point of your question. I guess if you look to the past, there's any measure of the future. If you look at the contract that we had with the U. S. Government, which had a blanket purchase agreement in excess of $500,000,000 because they recognize the differentiation and importance of MEO. And obviously, what Empower does is obviously take that to the next level. So certainly, wouldn't like to draw extrapolations from that too much, but that's certainly the a measure of the importance that MEO has had and all the indications are that the MEO enables more that we previously had based on more applications enabled with the flexibility and scale of Ophobe and Power. Thank you, guys. That's helpful. Thanks, Nick. There are no further questions in the queue. So I'll hand the call back to your host for some closing remarks. Very good. Thanks very much, everyone. Really appreciate you joining us. Happy with the results to date and look forward to talking to you all in Q3. Thanks a lot. Thanks, everybody. Thank you for joining today's call. You may now disconnect your lines.