Earnings Call: Q1 2021

May 6, 2021

Hello, and welcome to the SES First Quarter 2021 Results. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. I will now hand over to your host, Richard Whitening, Head of Investor Relations, FES to begin today's conference. Thank you. Good morning, everyone. Thanks for joining our investor and analyst results call for the Q1 ended 31st March, 2021. This morning's presentation was uploaded along with the press release and the subsequent release regarding the share buyback to the Investors section of the fes.com website this morning if you don't already have it. As always from me, please note the disclaimer at the back. 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, where we're joined from the U. S. By JP Hemingway, CEO of SES Networks. And so on that note, I'll hand over to Steve. Thank you very much, Richard. Good morning, everyone, and thanks for joining us this morning. I'm going to start on Page 3 and a good start to the year with revenue and EBITDA fully in line and with the business on track to deliver on our financial outlook. In video, the value of our core neighborhoods, our market leadership in delivering premium content and strong execution on renewal is translating into improved top line performance. In Networks, we've maintained revenue year on year, notable in view of the extended COVID environment. We delivered a solid step up in our government business with an expanded set of services delivered on our unique MEO fleet. More broadly in Networks, we're seeing good traction in the market and a step up in deal flow and pipeline. We continue to be laser focused on cost, cash generation Simplify and Amplify, our internal transformation program that we successfully implemented last year, is showing strongly with recurring OpEx down 7% year on year and is also reflected in the higher EBITDA margin versus this time last year. Leverage is also lower with €500,000,000 of year on year net debt reduction on the back of strong cash generation and continued financial discipline. Very positive progress with our C band clearing. As you know, we will earn USD 1,000,000,000 through successful clearing of Phase 1 by the end of this year and we're ahead of schedule with customer migrations. We're also fully on track with Phase 2 with satellites well into their manufacturing cycle. And finally on this page, today we're announcing a share buyback program to purchase up to EUR 100,000,000 of our shares over the next few months. Our share price does not at all reflect the underlying value of the business. We've invested substantially in our next generation augmented by substantial C band proceeds. This buyback program represents an attractive opportunity to deploy capital for the optimal benefit of our shareholders, and it underscores both our commitment to delivering shareholder value and our confidence in the long term fundamentals of the business. So turning to the key financial highlights on Page 4. Revenue of €436,000,000 and in particular, adjusted EBITDA of €268,000,000 were solidly in line with our expectations, and we are on track with the financial outlook that we presented to the market in February. EUR 263,000,000 delivered in Q1 in video reflects an improving trajectory, down 4.6% year on year versus 8% for the full year 2020, while €173,000,000 in networks represents solid performance an extended COVID environment, flat year on year and with increasing deal flow and traction as we progress through the year. I'm pleased that the structural changes that we implemented last year to reduce our footprint and our overall cost base are reflected in lower OpEx year on year and improved EBITDA margin of 61.4%. This laser focus on running our business in the most efficient way while supporting the growth opportunities that we see in networks and cloud will continue. Net profit is also up 41 point 5% year on year. So now to speak to each of our segments in turn, starting with Video on Page 5. And as I mentioned, a strong start to the year in Video. We serve 361,000,000 TV households, a reach that underpins the extraordinary value that we deliver to our customers across our industry leading neighborhoods. This reach allows us to defend our value strongly in renewal discussions with our most important customers. To that end, we concluded over €150,000,000 worth of deals in the quarter, including a major multi transponder long term renewal with Sky. We've continued to deliver on our recent successes with the public broadcasters in extending and augmenting our services with BMT, an important public broadcaster in the rich German the in which we support 18,000,000 TV homes, almost 50% of all homes in Germany, is our unique B2C position with HD Plus and I'm pleased with the progress that we're making here. The number of paying subs is growing again after a couple of years of stagnation. We've implemented a modest price increase given the expanded functionality and brand new look and feel that we've introduced. And excitingly, we'll be launching an IP version of HD plus in the coming months, substantially expanding our addressable market and building a capability that we expect to be able to leverage elsewhere in our business. Our good start to the year and strong progress on renewals means that we've already secured 90% of our video revenue outlook. And if we assume a nominal run rate for HD plus that number becomes more like 95%. Shifting to Networks now on Page 6. We maintain revenue in line with pre COVID levels despite the adverse impacts of the pandemic in some of the market segments that we serve and notably in some of the market segments such as aviation and crews that provided substantial growth up to that point. Given that these segments were our fastest growing prior to the global pandemic and have faced near term headwinds as the segments recover and as some of our service provider customers undergo restructuring. The growth fundamentals for Networks remain strong, and this is reflected well in our government business, which posted growth of 8 point 5% year on year on the back of additional U. S. Government services on O3D with notable wins with the U. S. Navy and other DoD departments. We announced an important contract award yesterday, a US35 million dollars deal with a major U. S. DoD combatant command for a new geo based reach back solution connecting forward stations units in remote locations back into secure sites within Europe. Also this quarter, LuxGOVSat, our affiliate operating the GovSat-one satellite, closed an important contract for services under the umbrella of the European Defense Agency program managed by Luxembourg Defense to support the govsatcom requirements of the Belgian MoD. This is an important win and first in what we hope of many projects and programs to be secured under the broad European Defense Agency program. 2 further wins with European governments in GEO and MEO, the expansion of our business through our strategic partner, Marlinck, in Africa and a successful demonstration of our high throughput, low latency MEO mobile capabilities with major European Navy program points to strong progress and good traction fixed data continues to perform well, and we're successfully building strategic partnerships with Tier 1 mobile operators and local providers serving rural inclusion programs. There's building interest in O2BN Power among our key Tier 1 operators, leveraging its unique capabilities to augment their fiber networks and leverage the ability to pool and share resources across a wide area, something that's unique to O3B Empower. As I mentioned, and in spite of the headwinds in our mobility sector, our fundamentals are strong given our differentiated fleet and our ability to offer multi orbit performance and resilience. In cruise, for example, we've secured in excess of 220 €1,000,000 of commitments from 4 of the largest cruise brands 4 of the 5 largest cruise brands and to expand onto O3B Mpower and our GEO Hybrid solutions. We're getting closer to the launch of FES 17 and O2BM Power, both programs on track to launch this year, FES 17 having recently passed its important thermal vacuum testing with flying colors. We've signed almost US200 $1,000,000 in backlog for the program since the start of the year. We'll be the first to market with our 2nd generation network, and we see good traction in the market over the course of 2021. O3BN Power is about more than just satellites, and we announced this week another key milestone with our O3BN Power strategic gateways. These investments will enhance our ability to serve customer needs in segments with high throughput per user requirements in the most flexible and scalable way, in turn driving acceleration of top line growth in networks from 2022. A number of these O2DM powered gateways will be co located with Microsoft, and our partnership with Microsoft, along with our overall cloud strategy, continues to gain momentum with increased revenues from delivering Azure Orbital solutions and building a strong pipeline with joint go to market cloud and connectivity services. And then lastly from me, a brief update on C band on Page 7. As you all know, executing on the accelerated clearing of C band spectrum while protecting our customers and their neighborhoods creates substantial value for our business and our shareholders. We have a large and dedicated team devoted to this effort, and I'm pleased to confirm that customer transitions are proceeding ahead of schedule. Starting next month, we will be into the broad deployment of filters that will protect our customers' cable feeds while on December 5, 2021, which will trigger the initial US1 $1,000,000,000 of accelerated relocation payments. Preparations for the 2nd clearing milestone at the end of 2023 and another $3,000,000,000 of payments is also on track with the new satellites under construction for launch in the second half of next year. And as we've discussed previously, we continue to pursue further C band monetization both within and outside the U. S. So with that, I will hand over to Sandeep. Thanks, Steve. Good morning, everybody. Given the continuing COVID situation and some of our markets, we are very pleased with the strong start to 2021 with our solid Q1 financial results. Our revenue and adjusted EBITDA is fully in line with our expectations. Net profit is up 42% year on year and net debt reduced over €500,000,000 As you can see on this Page 9, adjusted EBITDA 2 €68,000,000 represented an improved adjusted EBITDA margin of 61.4% compared to 60.4% in the last year quarter 1, 2020. This reflected solid revenue performance combined with a reduction in overall CapEx by 7% year on year, which demonstrates the benefit of the Simplify and Amplify program. At the revenue level, video delivered an improved performance, down 4.6% year on year compared with minus 8% recorded during quarter 1 of last year. As Steve mentioned, despite our customers' right sizing their requirements, we continue to capture value at our core neighborhoods through stable and in some cases increasing pricing to offset the impact from rightsizing. We also recorded higher video revenues from our progress in emerging markets as well as adding new paying HD plus subscribers as well as some price increases in Germany. In networks, our flat performance versus quarter 1, 2020 is evidence that even in the challenging COVID environment, our unique infrastructure delivers customer value, especially in government where you saw a growth of 8.5% year on year. This is partly offsetting the impact from mobility, which not surprisingly declined by 9% year on year with a lag effect after a double digit percentage growth during 2020. Our network revenues for 2021 is tracking in line with our outlook. The long term fundamentals 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 demand and is also set to benefit as the recovery from COVID starts to set in motion. I will now move to Slide 10, which explains the net profit bridge. Adjusted net profit for the quarter stood at €75,000,000 which is an increase of 42% compared with quarter 1 of last year. The effect of the lower adjusted EBITDA year on year was more than offset by 3 main positives, lower recurring depreciation amortization by €22,000,000 and our guidance for the year 2021 stands between €600,000,000 to €650,000,000 of depreciation and amortization. We had the second main positive, which is the lower interest cost. This is a very good reduction that we are continuing to see unfolding in our P and L account, a reduction of €6,000,000 in our interest cost from €41,000,000 in last year to €35,000,000 in quarter 1, 2021. Further, please note that the interest cost will reduce by about €25,000,000 per year with the recent repayment of the €556,000,000 bond that we fully repaid in March 2021. This leads to our annual net interest cost outlook of about €120,000,000 to €130,000,000 range. And then the 3rd main positive comes from the non cash ForEx gain which was about €9,000,000 compared with a loss of about €5,000,000 in the prior period. Tax remains unchanged compared to quarter 1 of last year and the effective tax rate is at 10.3% for the quarter, which is within our guidance range of ATR excluding C band between 10% to 15%. After the adjusted net income of €75,000,000 we had a few exceptional items totaling €6,000,000 on net. These comprise restructuring charge of €1,000,000 net C band charges of €7,000,000 and related tax benefits on these exceptional charges. Our reported earnings per share stood at 0 point percent compared to last year. Turning now to the balance sheet on Page 11. We continue to pay strong focus on our cash flows, thanks to which the adjusted net debt reduced by over €500,000,000 or by 13% compared to the prior period. As shown by the chart on the right, our weighted average debt maturity profile is quite healthy at average 8.2 years with no significant senior debt maturities coming due over the next 2 years. I will now move to the CapEx forecast on Page 12, which is unchanged having significantly reduced our CapEx spend by €390,000,000 between 20 to 2024, which we had announced with our previous full year results. Our robust cash flow will be able to support the growth investment of 2021 and 2022 with no major refinancing needs. After the growth CapEx peak of this year and next year for SCS-seventeen and 03 VM Power, 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. Our normalized CapEx needs as you can see in 2023 to 2025 are on average €375,000,000 per year with lower growth and replacement requirements. After these significant investments of over €2,670,000,000 we would have completed majority of our growth investments and majority of our renewals and will enter a sustained period of limited CapEx needs. Turning now to the financial outlook on Page 13. 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 85% has already been contracted. We are forecasting an EBITDA of 1,060,000,000 to 1,100,000,000 range for 2021 including the gains from the simplify and amplify program which is continuing to ramp up to €40,000,000 of recurrent annual savings in 2021 and which will continue to ramp up to further about 50,000,000 gains by 2022. As announced by Steve, we are happy to launch today a share buyback program of up to €100,000,000 to expand the shareholder returns in context of significant undervaluation of our shares which doesn't reflect the growth our growth outlook and the expanding cash flows and the C band proceeds which is due to come. And secondly, our strong balance sheet which is and we continued the program will start during May and we expect to complete the program over a few months. With this, I will now hand back to Steve to conclude. Thanks very much, Sandeep. So I will round up on Page 15, which provides a picture of our business in the coming years. We've kicked off 2021 well with the trends in video reflecting our expectations that we will see an improving trajectory as we reduce our exposure to U. S. Wholesale and legacy services while benefiting from the strength of our core neighborhoods and leverage our ability to deliver hybrid satellite and OTT solutions to our customers. Networks remains the growth engine for SES, and our investments in our next generation constellation O2B M Power provides us with the highly differentiated capabilities in high margin networks verticals, particularly in maritime and government, and we'd be coming to the market ahead of other enterprise load agency solutions and at time where the world is emerging from COVID, giving us the opportunity to capture the significant growth in data and connectivity. The entry into service of SCS-seventeen and OPBM Power will coincide with our investment peak, so cash flows from expanding top line and EBITDA will be augmented by meaningfully lower CapEx from 2023 onwards. And with our fleet largely refreshed and substantial growth investment behind us, we'll have substantially lower CapEx needs for the second half of the decade. And all of this is further reinforced with the GBP 4,000,000,000 in accelerated clearing proceeds that we will realize from the FCC's C band clearing process. We believe that the strong position that we outlined here is not at all reflected in the current valuation of our business, and our announcement today of a new share buyback program represents an attractive opportunity to deploy capital for the benefit of shareholders and reflects the confidence that we have in our growth and the long term fundamentals of the business. And so to conclude, we'll continue our laser focus on execution and on delivering on both our outlook for the year the exciting growth plans that we have for the future and the value creation that SES is well positioned to capture. And with that, we are open for your questions. Our first question comes from the line of Sami Kassad from Exane BNP. Please go ahead. Thank you and good morning, gentlemen. I have three questions to start with, please, Steve. The first one is on the improvement in Video. You're still guiding for minus 9% to minus 6% decline for the full year despite 4.5% in the Q1. So why would the video trends deteriorate in coming quarters? Or are you being very conservative in terms of the video outlook for 20 21? Secondly, MEO Orbit offer a somewhat higher latency than LEO, as we all know. But can you comment on whether the 100 millisecond difference in latency does indeed have any commercial relevance at all? In other words, what are the applications that can run on LEO, but would struggle to work on LEO, if any? And how would you address the issue? And lastly, EMPowered satellites live longer than LEO satellites. Your constellation costs much less than competitors. In my own opinion, I think bandwidth economics looks much better than LEO. So in that context, can you elaborate on your pricing policy? And on how Empower pricing or policy and on how EMPOWUR pricing or total cost of ownership compare to current LEO pricing? Thank you, Steve. Thanks, Sami. So look, on video, we've been sort of suggesting that we see guidance, no change in outlook as far as video is concerned. We gave a range obviously at the start of the year and continue to be comfortably within that range, I would say, as far as video is concerned, and we'll obviously update as we go through the year. On MEO Orbit, look, completely agree with sort of the inference in the question. We picked MEO for a very good reason because we think it is exactly the sweet spot between delivering low latency, but also far enough away from the earth for us to deliver all of the really key competitive benefits that we can bring with O2B mPower, which is about being able to flexibly assign very large amounts of bandwidth to high demand and highly valuable users, and that's something that we're laser focused on. So we think that the bandwidth economics, but more importantly, the products and services that we can deliver from MEO are meaningfully better, I would say, than LEO. And to sort of try and take your third question as well, what I would say is we don't price based upon sort of cost, we price on value and we position our products based on value into the market. And that's where we feel very, very comfortable with the position with O2V Empower. As I said, it's coming to the market at a very good time as the market sort of emerges from COVID. I think we will be unique in the market with the kind of capabilities that we have, and we see strong demand coming from users who are not super price sensitive and are actually more interested in the kind of quality that we can deliver, the kind of service that we can deliver. And that's the sort of the ground on which, if you like, we will sort of position O2B Empower into the market, and we're seeing strong traction on that basis. And still, is there a way to compare OneWeb price is into the telco industry, for instance, to empower or O3B prices? Yes. Again, I think we obviously know the OneWeb Constellation well as we know all of the other Constellations. I think they will sort of operate in sort of adjacent and sort of lower market segments than we're targeting. We feel like we have a very, very strong position with a large next The next question comes from the line of Michael Bishop from Goldman Sachs. Please go ahead. Thanks very much. Just three questions as well, please. So the first one is on the buyback. I think you're quite clear in the presentation that where the shares are and your confidence in future leverage of the business, the growth and the C band proceeds have framed why you're doing the buyback at these levels with the shares sort of close to €6. But I was just wondering behind that whether you've actually got a more formal framework now as to how you and the Board think about buybacks? Because clearly, if you're going to complete this buyback, as Sandeep said, over the next 3 months, you then still don't have very high leverage and you've got the €1,000,000,000 of C band proceeds coming in. So any sort of background on whether you've got a more formal framework will be really interesting. The second question is just to, again, pick up on video. It seemed like there was quite a lot of moving parts in terms of renewals in new business. So I was wondering if you could give us any more detail on that. You mentioned, I think, that some pricing actually went up. But whether you could give us any insight on that and in particular, Sky contracts would be great. And a final quick question would just be, what's the latest from your mobility customers with regards to sort of the impact from COVID and whether there's any sort of green shoots you're seeing there? Thanks. Great. I think you're going to hit all 3 of us. So Sanit's going to take the first, I'll take the second and JP will take the third. Hi, Michael. So look, this share buyback, we have been pretty clear. There's a $100,000,000 buyback. It's a very decent size. It's about 3.5% of our market cap. In terms of the framework, how we think about it, our financial policy is very, very clear, right? We maintain a base dividend, which is a minimum base dividend of $0.40 So that is given. And then there is any surplus cash that we try and deploy and discuss with the Board to deploy it in the best interest of shareholders and taking a look at our current investments over 2021 2022 as well as very strong balance sheet as well as the C band proceed just around the corner and given the significant undervaluation of our shares, we really believe that it is the best deployment of this €100,000,000 and we will continue to look at this framework, which guides us to manage between our growth and CapEx needs on one hand, but also continue to maintain our strong balance sheet consistent with the investment grade metrics and make sure that we continue to deploy our capital in the best interest of shareholders and that's what we are doing and that's what we will continue to examine within our financial policy framework. Yes. And I think on the video side, Michael, yes, I mean, I think predominantly driven by good solid performance around renewals. So we've captured a lot of the renewals that we need to for 2021. So that reflects in the fact that, as I said, 90% of our revenue for 2021 is already secured and effectively 95% if you include a sort of a nominal run rate for HD plus So we feel good about that. And I think it reflects solid performance across the board, a couple of new wins, an important renewal with Sky, dollars 90,000,000 in additional contract value that came as a result of that. And when we add that to the existing business that we have with Sky, that extends them out into 2027. And obviously, that also comes on the back of an important renewal with Canal Plus that we closed at the back end of last year. So I think the momentum that we had at the back end of last year with renewals and then sort of carrying forward into a good 3 months on the video side is what shows this trend. Like I say, no change in our outlook for the year, but we feel very solidly within guidance for video. And then perhaps hand to JP for the third question. Sure. Good morning, Michael. And in terms of the COVID impacts, I think it's fair to say that COVID hits all of our segments to some degree, but we're really pleased with the resilience and performance of fixed data and government as the results have shown here. But clearly, they focused on the critical projects, and we've been very successful in winning those critical projects, which is fantastic. But obviously, we talked before about cruise and aero being the two segments that were very visibly impacted by COVID. But as we said before, we've had fixed long term contracts with both of those segments. But obviously, we've tried to be flexible, try to be flexible as those customers have suffered their own end customer business. And where we've been flexible, we've generally managed to extend our contracts with those customers for the future. And certainly in Cruise, as we discussed, we've extended them well into O3B and Power, which is fantastic for us and also their own innovation for the future. Now we're watching those segments very carefully. We obviously work very closely with those customers. We don't see a miraculous recovery starting this year, but we are seeing good return to sale both in Europe, Asia and good progress with the CDC in cruise. So we're watching that carefully. And in aero, probably starting to see more flights, but also see that recovering well into next year. The good news is we've got really strong long term fundamentals in those segments. And the new business we secured pre COVID that yet was returned so was yet to get to revenues during this period will drive future growth as that demand recovers. Great. Thanks, everyone. The next question comes from the line of Nick Dempsey from Barclays. Please go ahead. Yes, good morning guys. Can you hear me? We can Nick. Excellent. I've got three questions as well. So first of all, just on the fixed data, you mentioned some issues in the Pacific. Is this competition with subsea cables? And is that something we should worry about as a headwind for a while? And while I'm on fixed data, minus 1% organic in Q1, What could make that year on year run rate improve through the rest of 2021? And then same question, you've given your opinion on potential consolidation in the sector on previous calls. Now that all of the other FSS players except Intelsat have been investing in LEO and you've shown your views on the economics of LEO, Does that make it less likely that you could participate in consolidation in this market? And the third question, your backlog for Npower and SCS 17, that's not set up since February. Is there a seasonal element to when you're likely to add new contracts? Or can we expect that number to go higher by the time you reach the half year? Thanks, Nick. JP, why don't you jump in on 1? Sure. Yes. Thanks, Nick. So fixed 80, yes. In terms of the down 1%, let's put that in context. It's a fraction of €1,000,000 right? So it really is sort of flat year on year, which given the year we've been through, we actually feel pretty positive about. And we've actually greater than our expectations in our plans. So we're feeling pretty good about that. What do we see through the rest of the year? We have got really good progress with the major Tier 1 mobile operators around the world. And some of these rural inclusion projects that have actually become more important as a result of COVID for leading connectivity out into the most rural locations for health and education. We're seeing really good progress in that. So we see the timing of that going through the year and absolutely would underpin the guidance we have between sort of 2% and 6% for the overall networks growth period. Specifically on the Pacific region, yes, we've obviously anticipated submarine cables coming into some of the islands where we were the only connectivity medium at the time. With long plans for that being a point where those cables come in. And we tend to shift to a more second resilience mechanism to back up those cables because they're not always highly available and take a long time to fix when they have failures. So something we have planned for. And so with Empower, we've got a much greater capability to connect to the outer islands, not just the main islands. And there's a number of programs we've got ongoing there. So we expect some growth from that sector in the future. Nick, I'll take the second question, which is sort of around consolidation, but also our view on LEO. So the first thing I'd say is we have absolute conviction around multi orbit rather than an aversion to LEO. We have sort of taken an approach that says we intend to combine the investments that we're making in GEO and MEO and use the full power of that network in an integrated way. And we think that, that also gives us advantages when we think about looking at ways that we can improve return on invested capital across the industry without necessarily relying on M and A. We think that there's ways that we can use the integration that we're building with our ARC system that will allow us to sort of move resources across our MEO network and our GEO network, that those networks will ultimately be interoperable, and that means that we can also interoperate with others. I think with respect to LEO, we certainly don't say that LEO isn't a valid place to serve customers from. But the economics for a pure LEO network are really challenging, and I think our view on that hasn't changed. And with respect to consolidation, again, I think probably no real change in our position, which is that I think the overall industry will benefit from consolidation. I think, again, return on invested capital across the industry will become challenged, and I think that probably means that consolidation is needed likely, what have you. But we will continue to be financially disciplined, as you would expect, operate in the best interest of SES, look at opportunities that are there, but remain absolutely committed to sort of delivering on our promise to our shareholders, which is probably, Nick, what you'd expect me to say. And then your third question was on backlog for OTP Empower and FCS 17. Look, I mean, it feels like yesterday that we had this sort of conversation. So I think a relatively short time between our end of year results and Q1 results. I wouldn't read too much into that. We've got a strong pipeline. We see really good opportunity. We've closed £200,000,000 in backlog since the beginning of the year, which feels like good progress. And the most exciting thing is the launches are on schedule, which in this environment is not 17 and O2G Empower both slated to go off this year and sort of excitement building, I think, both within the company but also externally in the customer community for the services that we're going to bring on the back of those assets in 2022. Thanks guys. Thanks Nick. The next question comes from the line of Alexandre Pether to Societe Generale. Please go ahead. Yes, good morning and thank you for I'll have to continue with the tradition set last word for 3 questions. So the first one is just kind of a maintenance one. On HD Plus price increase, could you quantify that? And what's the timing, presumably, that's Q2? But if you could give us an order of magnitude, that will be it. Then secondly, can you give us a view of your long term average CapEx to sales ratio that you're targeting in your model? And that includes the peaks that you see now with O3B, with MPOWER launches for you close to 50% CapEx to sales in 2022. And then that drops straight to 12% the following year as you complete that constellation. So I'm just wondering, is 25% a good range for your over the cycle capital sales intensity? And then just finally, how much of the EBITDA margin strength should we extrapolate into the remainder of the year? I mean, I know that we have your guidance, so that's something to anchor our estimates around. But would you say that your EBITDA is now outlook from here? Thanks. Great. I got your first question on H2 plus. The second Great. I got your first question on HD Plus. The second one was a little unclear because I'm a bit annoyed. So we might ask you to repeat that and then Sandeep will take the 3rd. So on HD Plus, it was a relatively modest price increase. It was sort of high single digits in terms of percentage. But nevertheless, important, right, in terms of the step up. And the fact that we've seen good subscriber traction both sort of before, during and after that points to the fact that the sort of the B2C customers that we have in the market more broadly sees real value in the product that we're bringing to the market. We've done a lot of work on HD Plus over the last year or so. About 50% of all TVs that are now sold in Germany include the HD plus operator app, which means that customers no longer need a set top box or a module. They can literally just buy a new TV and go straight to the HD plus environment. And that environment has been sort of meaningfully upgraded. So we provide a lot more functionality, a completely different look and feel, and that kind of, I think, is generating good traction with customers in the market. And so we're seeing subscriber growth and a little bit more ARPU from those customers in what is a very important market for us. Spandeep, handing to you for the 3rd question and then I'm not sure if you caught the second. Yes. So on the EBITDA margin, as you see that we have made very good EBITDA margin in quarter 1. We are at 61.5%. Currently, we are trading very comfortably towards the high range. And we are continuing to focus on execution. First of all, on the revenue, as you can see from our performance in video as well as in network during quarter 1. And secondly, also on our CapEx on our OpEx where we continue to make very good progress on delivering the gains from Simplify and Amplify program that continues to ramp up. And this basically shows that we are on a good track so far as our EBITDA margin is concerned. And I can also comment a little bit about some of the average capital guidance in context of the as we told you earlier on our CapEx, our CapEx past this investment peak in 2021, 2022, it continues to go down meaningfully. Over 2023 to 25, we expect about €375,000,000 But by 2025, we have taken care of all our major growth investments as well as major renewals. So long term CapEx, we expect to be sustainably lower levels. Yes. Yes. I was just wondering if you could give us a percentage target range where you expect to be longer term, including the peaks that you see because of the constellation launches with O3B? So is 25% CapEx sales good or is it 30% or is it 20%? I mean, I think so. The CapEx profile that we show on Page 12 of the presentation includes all of the launches and all of the sort of the O2B Empower investment. So at the end of this period in 2025, we'll have a brand new 11 satellite constellation for O2BN Power. We will have meaningfully refreshed our core video neighborhood. And as we look beyond 2025, our view of CapEx is lower than the average $375,000,000 that we show on Slide 12. So the second half of the decade, I would say, given that we have a brand new fleet, a brand new constellation, looks meaningfully lower, not providing guidance at this stage, but the second half of the decade looks like a low CapEx environment for us. Okay, thanks. The next question comes from the line of Gail Thorne from Jefferies. Please go ahead. Thank you. My first question was on the LEO question again and obviously the recent news of Eutelsat taking a minority stake. And one of the things that stood out for me was the idea that in the cloud era, latency becomes strategic or similar such language. And obviously, SES has been a 1st mover under that thematic umbrella. So I'm interested, Steve, to hear how you protect that 1st mover advantage. 2nd question, just to frame the share the decision to buy back shares a bit better or a bit more. It'd be interesting to hear the type of growth investments that you could have made with that money at this point in time. And then lastly, and it's a very specific question, but picking up on the Global Eagle and Eutelsat announcement from the other day, it's very curious. They are your major partner in North America is where you provide them a huge amount of Ku. And there's obviously been volume step down the past year to reflect the impact of the pandemic. So I'm just curious why Global Eagle is buying Ku from Eutelsat at this point in time. I'm inclined to think it's because the satellites on an inclined orbit, but you tell me. Thank you. Yes. Thanks, Giles. Look, I mean so is latency strategic? 100%. And it's something that we've been, I would say, leading the industry in that area. It was an popular view. And I think that reflects the fact that it's true. And sort of latency was a challenge for the satellite industry historically. And I think the industry is now addressing that challenge. And that's very, very positive. That said, what you need to do is find that sweet spot where you can deliver the right level of performance, but also the right sort of level of profitability and of the constellation, affordability of the constellation. And that's where we feel like MEO is really, really advantageous. And then how do we capture the cloud opportunity? I think it's doing exactly what we're doing with, for example, our partnership with Microsoft and more broadly. And I think they see a real value in some of the market verticals that we're able to serve, I would say, somewhat uniquely by having the ability to deploy a lot more bandwidth from MEO than is typical from LEO Networks. With LEO Networks, you tend to be limited by the individual performance of the individual satellite. And that means that you typically can't provide a lot of concentrated supply or a lot of concentrated service. So for example, cruise, where you've got kind of floating cities, it's why we've become by a distance the number one provider in cruise with all of the large cruise lines, but also a number of government applications, a number of other applications where our ability to move very substantial amounts of bandwidth around the system and to do it flexibly, which is something that comes uniquely from MEO, is really, really attractive. So I think, Giles, the answer is yes, latency is absolutely strategic. Yes, cloud, absolutely strategic. And I think we're doing all the right things by leveraging the very differentiated infrastructure that we're building, but not only that, partnering in the right way with the broader ecosystem, something that we've been, again, banging on about and talking about for some time, sort of taking satellite mainstream and driving satellite into the broader ecosystems of telco and buyback, look, I On the buyback, look, I mean, I think we've said it all in the presentation and we've said it all in sort of the voice side that we see this as an interesting opportunity to create shareholder value and with the value of the business where it is, it's a very good opportunity. I would say in terms of growth growth, we are investing very substantially in growth, right? If you look at O2B Empower and SES 17 and even just over the course of the next couple of years, we're investing 1,500,000,000 dollars in CapEx in order to bring this fantastic second generation state of the art network to life on our own balance sheet. So that reflects a very significant commitment to growth. And the fact that we're able to grow, remain investment grade, invest very substantially in our network and indeed, sort of launch this buyback, I think, reflects the financial strength and the strength overall of the business. And then your third question was on Global Eagle. JP, do you want to take that? Yes, absolutely, Stephen. Good morning, Giles. So as part of Global Eagle coming out of Chapter 11, obviously, they've had the ability to restructure their contracts and their situations. They remain a very strategic customer of ours and a very strategic partner as we go forward. But obviously, as part of that restructuring, they're able to look at what they needed during this COVID impacted times and analyze the price performance of any assets they would like to take, which as you say, they've chosen to take something from Neutroseth. I won't comment much more on that, but obviously, they've been matching what they think their needs are to the price performance they need to supply in the current COVID impacted environment. Thank you, guys. Steve, if I can, just a follow-up. Why not take that $100,000,000 and in this era of huge opportunity and the sector being much more, I suppose, radical or ambitious, why not take it and use that $100,000,000 to lock in Google as a key cloud partner or maybe not Amazon because they're probably going to go a different direction, but why not go for it? Giles, I think we are going for it. I don't think you should sort of read into the fact that we've launched a share buyback, meaning that we're not full in on growth and delivering on the promise that we have with the network. I think like I kind of answered, I think it speaks to the strength of the business that we're able to invest very substantial CapEx in growth in bringing this brand new lasered around that, but also deliver value to our shareholders, firstly through the dividend that we just recently paid and now through the share buyback program. So it's a balanced approach, I would say, that can deliver growth for us in the future and also shareholder value today. Thank you very much. The next question comes from the line of Ben Lyons from Credit Suisse. Please go ahead. Hi, thanks for taking my questions. I'd also have 3. First one is, if there is any update on the issue regarding claims against that would be really helpful. The second one was regarding C band opportunities. I was just wondering if you also saw any risks around that. You were seeing a competitor of yours facing problems in the Netherlands? I was just wondering if there are any hurdles to possible further monetization? And lastly, a quick one, I'm not sure if I missed it, but would you be able to quantify the COVID impact to the OpEx or within the OpEx savings? That would also be quite helpful. Thank you. Very good. So I think the first question was around Intelsat litigation. So I would say no real update from what we've said previously, which is we intend to hold Intelsat fully accountable for the agreement that they had with us. I think the case is proceeding and it will be heard before Intelsat emerges from their Chapter 11 restructuring. So that's a positive thing. So we are sort of the schedule works out well from that standpoint. And I believe it's sort of June, July time frame where we expect that to kind of resolve itself. C band, didn't get the reference to the Netherlands, so you might need to expand on that a little bit. But what I would say is no risk that we see in the C band clearing process. It's going very well. We have all the filters in house that we need to in order to secure the Phase I clearing. The customer clearing is ahead of schedule. We'll have a busy time of it over the summer deploying filters, but we really feel like that program is going as well as it can and similarly on the Phase 2. So there may be a follow-up on that because I'm not sure I got the question, but the bottom line is C band clearing. We see no risk there and really the program is going as well as we could have expected it to. And Sandeep, do you want to take the COVID impact? Yes. So in terms of the COVID impact, as we had announced last year as well, this COVID mitigation plan last year, we had targeted about €50,000,000 of savings that we fully saw as an outcome in our P and L account. Clearly, this was partly offset by certain bad debts. So we were in a range around €30,000,000 €35,000,000 of net savings, including certain one off impacts, right, including from bonus cards, etcetera, that we had done. Now as the world starts to recover, so we see this year that these COVID related savings are starting to go down quite a lot, But we are still having some savings, but they are in low single digit millions on a quarterly basis. But the good thing is that while some of those costs start to come back, we are starting to see meaningful impacts on the simplify and amplify program where the savings run rate is ramping up very decently around €40,000,000 savings for this year and €50,000,000 for next year. So we are fully on course. So far as our OpEx is concerned, we are laser focused on every cent of cost that we spend on the business and be disciplined about it. Great. That's really helpful. Just on the Netherlands point, inmarsat have been reallocated spectrum essentially to make way for the 5 gs spectrum. So I was just wondering if you saw any risks around that or if that would impact any of your services? We've been tracking that. We don't see any direct read across or any impact from our standpoint. Great. Thank you very much. Thank you. The next question comes from the line of Ranjit Roshan from Deutsche Bank. Please go ahead. Great. Good morning. Thanks for the question. Just 2 very quick follow ups for me, please. Firstly, on video, you talk about the 90% of the revenue outlook contracted for this year. Is it possible to get an update on the website on the EchoStar and Quip Saturn, if that has filtered into that 90%? Or is that more going to hit FY 2022 whatever the outcome there? And secondly, Sandeep, thanks for providing the Simplify and Amplify impact this year and next year. Is possible to just get a breakdown of where those are coming from? Because I think previously you've talked about potentially restructuring certain areas of the business, footprint adjustments. And I know you've closed certain offices, but a bit more detail there would be very helpful. Thank you. Yes. So, want to avoid getting too specific around sort of individual customers arrangements. I would say, we've spoken about U. S. Wholesale and kind of what we expect to happen there. The good news is with Quetzap, we continue to support an important customer in Mexico, in Dish Mexico, and that's something that we expect to continue going forward. And so what I would say is fully factored into our outlook for 2021 and 2022. Obviously, we're not providing guidance, but we have a clear idea, I would say, in terms of what we expect to happen with KetSat and importantly, the customer that we support on KetSat going forward. Yes. So terms of the Simplify and Amplify program, as we had announced last year, it is focusing very heavily into our organization and our offices, integration thereof and a complete restructuring. I mean unlike ever before in FCS history of 35 years, It was a program of massive magnitude impacting almost 20% of our people around the world. And it is creating more concentrated offices, more agile teams coming together and creating this pool of savings, we have taken a look not only at our internal manpower, but also our external manpower, our contractors and gone through every single line. And that is where we continue to see now very good progress starting to unfold in our quarterly results and ramping up towards this €40,000,000 €50,000,000 of run rate savings that we are very, very confident about in fully delivering. Great. That's super helpful. Thank you. The final question comes from the line of Patrick Wellington from Morgan Stanley. Please go ahead. Good morning, everybody. First question on Video. Actually, you go back to Sami's question originally. Do you think this quarterly performance is an expression of the flattening of the curve that you've talked about in the video organic revenue decline. As I remember from the full year, you're looking at 3 things to flatten that curve. The U. S. Now less than 10% of video turnover, the decline or the effect of the decline there falling away, the rightsizing effects in Europe being complete and your own retirement of those low margin distribution revenues being over. So perhaps you could frame the video the better video performance in the context of those three things, U. S, rightsizing and the distribution stuff? Secondly, on networks, is it still your feeling, as it was at the full year, I think that crews will begin to normalize in the middle of this year, but not but Aero won't normalize until next year. Is that still your feeling about Cruise that, that starts to come back this year? And then thirdly, on 3B M Power and SES 17, by the time it launches, what would be a good backlog number in your view? Very good, Patrick. Thank you for those questions. Yes, video, I mean, I think you're exactly right that we see the sort of the trajectory previously. We've had exposure to U. S. Wholesale and given the market there, that's something that we knew and understood would sort of reduce. And then we've also talked about the C band neighborhoods in the U. S. Will sort of somewhat shrink, and that has been not unhelpful, I would say, in the context of the C band clearing. But actually, we see some good stabilization there. We've secured some good renewals during the course of sort of early 20 of cases, a little bit unexpected. So that's been helpful and probably, of cases, a little bit unexpected. So that's been helpful and probably gives us a very positive. Yes, and rightsizing, absolutely, this is about core DTH customers balancing what they carry over satellite versus what they carry terrestrially. We feel like we're really on a good side of the curve. Most of our neighborhoods are already MPEG-four or HEVC. Our customers already have hybrid solutions. And so we feel like we're a good way through that process. And again, the fact that we see the curve flattening is sort of reflects that. And similarly, yes, we've done a lot of hard work around our services to make sure that we're really delivering services in a profitable way, and we've sort of refocused what we do towards our largest and most strategic customers. So for example, last year, we signed and we've just implemented and we're now operating play out and services for the BBC internationally. That's a very important customer. But we've also reoriented towards the cloud. And in the cloud, we can really deliver a completely different level of services to our customers, a lot more flexibility, but also do it with improved margins. And so we've reduced our exposure to the, I would say, legacy on premise low margin services that were part of our portfolio. We still have that work isn't completely finished. So we will continue that over the course of 2021. But I have to say already the dent that we've made there has made a difference to the profitability that we have within our Video Services team and that focus will continue. And like I say, I'm pretty optimistic not only that we will shift the profitability of those services, but actually we're also developing some very interesting capabilities in the cloud and sort of more to come there. And when you think about that in combination and with HD plus and the experience we have in B2C as well, I think we've got some unique aspects to our video business, and I think we can leverage more as we go forward. On the network side, maybe JP, you can give the voiceover. Yes, absolutely. So your question was around mid year for Cruise and next year for aero. So maybe I'll start by reiterating that our contracts are generally fixed in nature. So therefore, the relief that we've given is more around cash release in the short term. And as I said, in general, we've managed to extend our partnerships by being a good partner through this challenging period. But yes, on cruise, some of the cruise ships that we serve are sailing now. They're called these cruise to nowhere, so they're contained within certain regions. And I talked about Europe and Asia. And the whole industry is watching carefully the latest CDC guidance and looking to see July onwards for those kind of U. S.-centric cruises to start, and we're obviously working fairly carefully with that. But as we said before, it's the new business that really suffered in both cruise and aero. We don't expect an immediate uptick for that. We're watching when the new vessels are set to sail. And that situation is fairly fluid. So we're looking for that new business to really translate into revenues through the 2nd part of this year, but upwards into 2022. On aero, despite passenger numbers increasing and indeed those passengers consuming more connectivity than before, it was all about new business. And we don't expect that much new business to suddenly ramp up in the back end of this year, more certainly in 2022 beyond. So in essence, yes, your supposition is worth fairly close. And Patrick, on sort of the backlog of OPB, Empower and SCS 17. So look, important that we continue to provide you guys with visibility of how we're doing there. I think $200,000,000 signed already in 2021 represents a good performance, something that we have good traction on as well. I would say we've got as we look at the pipeline, there are a number of opportunities in there that look really good and where we feel like we have a strong competitive position, particularly, as I said, given that I think we're going to be largely on our own with O2B Empower in the market with the kind of capabilities that we can deliver. So I think we feel like we've got a very strong right to win in significant parts of the network verticals that we're serving. Not going to give sort of guidance on what we think good numbers might be at either time of launch or time of in service. I think it's really about incrementally signing more and more business as we approach the launch and we approach the in service dates. And that's something that I'm very optimistic that we will continue to do given the pipeline that we see. Steve, that's great. And quickly while I have you, you talked also about the opportunities for C band in other markets briefly. I think you've talked about Canada, Brazil, maybe 2 to 3 other markets. Is there any update to give there? Yes. I think the processes are moving forward. I mean these things rarely go as quickly as you would like, right? And that was definitely our experience with U. S, which was probably a 3 year process. I think others won't take that long, but it's not something that necessarily we expect to see progress on a quarterly basis. So I think the next one is likely to be Canada. That's the one that we're spending a good amount of time on and the sort of the government are thinking and the regulator thinking seriously about what to do there. Brazil is moving. I think Brazil probably won't be a big, let's say, C band monetization opportunity, but I think it may well be an opportunity for us to capture sort of more of the market in Brazil, which would be equally interesting for us. So yes, I think those are the 2 shorter term, but short term is a bit of a movable feast in the context of this topic. The timeline is difficult to control, but I do think that there are good opportunities in Canada and Brazil. And I think more opportunities in the U. S. As well as we speak to and work with the carriers who have been successful in the record breaking auction that was completed in the early part of the year. That's great. Thanks. Thanks, Patrick. That's the end of the Q and A session. I will now hand over to your host. Okay. Listen, thanks very much for joining us as usual. Happy with the start that we've made to the year, and we will focus hard on execution and driving the business forward throughout the rest of 2021. So I look forward to speaking to you all the end of the first half. And with that, have a great day. Thank you for joining today's call. You may now disconnect.