Networks division stars as SES shows solid Q3 2022

Global satellite operator continues to benefit from its pivot away from video and to business connectivity, reporting a positive third quarter but continued revenue decline for its video business

Annual revenue growth of 2.7% in its networks business line and the prospects of further business connectivity revenue through medium Earth orbit craft and C-band mobile communications have led to renewed business optimism at satellite provider SES.

For the three months ended 30 September 2022, SES posted total overall revenue of €1.4bn, up 6.1% year on year on a reported basis with adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) of €829m, up 0.7% annually, and adjusted net profit of €277m, an increase of 23.2% compared with the same time a year ago on as reported basis. These figures included contributions from a stronger US dollar and from the DRS Global Enterprise Solutions business, servicing US government contracts, which was acquired on 1 August 2022.

SES Networks’ revenue of €636m included a first contribution from DRS GES of €32m. On a “same scope” basis, excluding DRS GES, Networks grew by 2.7% year on year compared with year-to-date 2021, with growth in Mobility of 17.7% year on year and Fixed Data rising 2.2%, while the rapid US withdrawal from Afghanistan in Q3 2021 was the main contributor to lower revenue in Government, down 7% annually.

Adjusted Ebitda of €829m represented an adjusted Ebitda margin of 59.2%, down 3.2 percentage points compared with the same time a year ago, including recurring operating expenses of €571m and an Ebitda contribution of €4m from the acquisition of DRS GES from 1 August 2022. Adjusted Ebitda excluded US C-band operating expenses (net of reimbursement income) of €18m (YTD 2021: €18m) and other significant special items of €11m, down €4m on the same time a year ago.

Overall quarterly adjusted net profit grew by 23% year on year to €277m including a net foreign exchange gain of €87m and higher income tax expense of €52m – €16m more than at the same time a year ago.

Contract backlog by 30 September 2022 was €5.1bn, with €6.4bn gross backlog including backlog with contractual break clauses, including a DRS GES contract backlog of €100m. An in-service/consuming backlog from the SES-17 and O3b mPOWER craft was calculated to have a gross backlog of $955m. The first O3b mPOWER launch is scheduled for 15 December 2022, with further launches planned for Q1 2023.

Looking forward, SES said US C-band clearing had been de-risked to deliver over $3bn of value and that differentiated investments would drive future long-term growth. Additional clearing for comms provider Verizon was nearing completion and SES expected to gain $155m in Q4 2022 with balance up to $15m in early 2023.

“Our year-to-date performance reflects solid ongoing execution across the business and we remain fully on track to deliver on our 2022 outlook, to capture significant value from US C-band, and to position SES for profitable long-term growth through the deployment of our state-of-the-art multi-orbit assets and architecture,” said SES CEO Steve Collar.

“With the successful launches of our first three C-band satellites, the second phase of clearing is de-risked and therefore we have clear line of sight to $3bn in accelerated clearing payments due at the end of 2023. In equally good news, the additional US C-band clearing for Verizon is nearly complete and we expect to receive the majority of the $170m of agreed proceeds by the end of this year.”