Eutelsat Communications: Third Quarter and Nine Month 2018-19 Revenues

Regulatory News:

Eutelsat Communications (ISIN: FR0010221234 – Euronext Paris: ETL)
(Paris:ETL) today reported revenues for the Third Quarter and Nine
Months ended 31 March 2019.

Revenues for the three months to 31 March 2019

Rodolphe Belmer, Chief Executive Officer, commented: “The Third
Quarter of 2018-19 saw the return to growth in Broadcast on a
quarter-on-quarter basis, an improvement in the US Government renewal
rate and commercial wins in Maritime Mobility. The Konnect Africa
broadband service is showing positive indications of demand but its
ramp-up has been significantly hindered by some short-term operational
issues. Moreover, we are experiencing softer conditions in Fixed Data
and Professional Video. In consequence, revenues for the Operating
Verticals at the nine month stage stood at -3%, and we now expect the
outturn for FY 2018-19 to be in a similar range, versus our previous
objective of ‘broadly stable’.

We are encouraged by the resilience of our core Broadcast business,
and we continue to target a return to slight revenue growth in FY
2019-20 on the back of the materialization of delayed business, traction
in broadband and the availability of incremental capacity with EUTELSAT
7C and EUTELSAT Quantum. All other financial objectives for the current
and following years are also confirmed.

Market conditions continue to support the pertinence of the focus on
Discretionary Free Cash Flow generation implemented three years ago, and
on which we continue to draw on all levers. In this context, our
strengthened group is well placed to benefit from the next growth cycle
in our industry driven notably by Fixed Broadband and Mobility. Finally,
the outcome of discussions on tax territoriality treatment will lead to
significant reduction in our annual tax burden.”

HIGHLIGHTS

• Outcome of discussions on tax territoriality treatment to secure a
  reduction of the order of €70m in our annual tax burden, subject to
  final formal approval by French Tax administration.
• Resilience of core Broadcast with return to quarter-on-quarter growth,
  supporting stable Video revenues;
• Multi-year, multi-transponder commercial wins in Maritime Mobility
  including an agreement with Speedcast on EUTELSAT 133 West A and a
  multiple-satellite deal with Marlink;
• Recovery in renewal rate with the US Government to circa 85% in Spring;
• Positive indications of demand for Konnect Africa confirmed, but
  ramp-up hindered by temporary operational issues;
• Revenues for the Operating Verticals now expected at circa -3%
  like-for-like for FY 2018-19 reflecting Fixed Broabdband delays,
  deterioration in Professional Video and Fixed Data trends and slower
  than expected materialization of Video pipeline;
• All other financial objectives confirmed for the current and following
  year.

THIRD QUARTER REVENUES⁶

Total revenues for the Third Quarter 2018-19 stood at €336.7
million, up 0.7% year-on-year.

Revenues for the five Operating Verticals (ie, excluding ‘Other
Revenues’) were down by 4.0% on a like-for-like basis, ie, excluding a
negative perimeter effect of c.1.2 points (disposal of the stake in
EUTELSAT 25B) and a positive currency effect of c.2.4 points.

Quarter-on-quarter, total revenues were up by 4.3%. The revenues of the
Operating Verticals were down 1.0% like-for-like.

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

Core businesses

Video Applications (67% of revenues)

Third Quarter Video Applications revenues were down by 2.5% to
€215.4 million, on a year-on-year basis. This reflected mostly an
accelerated, double-digit decline in Professional Video in a context of
intensifying competitive pressure. Professional Video now accounts for
less than 8% of Video revenues. Pure Broadcast revenues were stable.

On a quarter-on-quarter basis, total Video revenues were stable while
Broadcast revenues recorded a slight rise.

On the commercial front, a multi-transponder contract was secured for a
new DTH platform on EUTELSAT 65 West A. On the other hand, other
projects in the pipeline were delayed for non-structural reasons and
should materialize in the near future.

At 31 March 2019 the total number of channels broadcast by Eutelsat
satellites stood at 7,021, up 2.0% year-on-year and by 3.0% stripping
out the effect of the disposal of EUTELSAT 25B. HD penetration rose by
11% to 1,509 channels, implying a penetration of 21.5% of channels
compared to 19.7% a year earlier.

Government Services (12% of revenues)

Third Quarter Government Services revenues stood at €39.9
million, down 1.0% year-on-year. This reflected on one hand the
incremental business secured last year at the 174°East orbital position
covering Asia-Pacific, and on the other, the low outturn of the Fall
2018 renewal campaign with the US Government (70%).

On a quarter-on-quarter basis, revenues were stable (+0.2%).

The outturn of the Spring 2019 renewals with the US Government showed an
improvement at 85% in value.

Fixed Data (9% of revenues)

Third Quarter Fixed Data revenues stood at €30.4 million, down
17.8% year-on-year. This reflected ongoing pricing pressure in a highly
competitive environment as well as softer volumes in Latin America.

On a quarter-on-quarter basis, revenues were down 7.3%.

Connectivity

Fixed Broadband (6% of revenues)

Third Quarter Fixed Broadband revenues stood at €19.1 million,
down 9.7% year-on-year. Excluding the expiry of a contract with a
Middle-East customer for a spotbeam on EUTELSAT 3B, re-contracted to
Taqnia in the Mobile Connectivity vertical, the underlying performance
was -7.7%. This reflected a further decline in European Broadband with
scarcity of capacity in certain countries and the transition to a new
distribution model (Preferred Partnership Programme) which is leading to
a decline in activity with legacy distributors, not yet fully
compensated by the new model.

Revenues for Konnect Africa are running behind expectations reflecting
temporary operational issues (political situation in DRC, regulatory
delays in Ivory Coast and more generally logistical issues). As a
result, no material revenues are expected in the current financial year.
This reflects mostly rollout issues and does not, however, alter our
view of the strong potential of this market where we expect a ramp-up
next fiscal year.

Fixed Broadband Revenues declined by 5.3% on a quarter-on-quarter basis.

Mobile Connectivity (6% of revenues)

Third Quarter revenues for Mobile Connectivity stood at €19.8
million, up 4.7% year-on-year. They reflected the entry into service of
the UnicomAirNet contract on EUTELSAT 172B, the carry-forward impact of
the contract with Taqnia at 3°East and 70°East and the ongoing ramp-up
of capacity contracts on KA-SAT.

On the commercial front, a multi-year, multi-transponder agreement was
signed with Speedcast for capacity dedicated to Maritime Connectivity on
EUTELSAT 133 West A, representing another win in this vertical following
the conclusion of a multi-satellite deal with Marlink.

Quarter-on-quarter revenues were up 1.3% with the benefit of
UnicomAirNet partially offset by the end of a temporary wide-beam
contract on EUTELSAT 172B.

Other Revenues

Other Revenues amounted to €12.1 million in the Third Quarter
versus €0.6 million a year earlier and -€3.5 million in the previous
quarter. They included a significant one-off engineering fee and a -€5.7
million impact from hedging.

OPERATIONAL AND UTILIZED TRANSPONDERS

The number of operational 36 MHz-equivalent transponders stood at 1,418
at 31 March 2019, broadly stable versus end-December and slightly down
year-on-year, mainly reflecting the disposal of EUTELSAT 25B in August
2018.

The number of utilized transponders stood at 960, down 10 units versus
end-December. Year-on-year they were up by nine units on a reported
basis and up by 17 excluding the disposal of EUTELSAT 25B. The evolution
versus end-December principally reflects lower Fixed Data volumes in
Latin America. On a year-on-year basis this was more than offset by new
contracts in Video as well as the ramp-up at 174°East.

As a result the fill rate stood at 67.7% at end-March 2019 compared to
66.8% one year ago and 68.3% at end-December 2018.

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

BACKLOG

The order backlog⁹ stood at €4.4 billion at 31 March 2019
versus, €4.6 billion at end-December 2018, reflecting natural backlog
consumption in the absence of material Video renewals. It was equivalent
to 3.1 times 2017-18 revenues. Video Applications represented 76% of the
backlog.

NINE MONTH REVENUES

Revenues for the first Nine Months of FY 2018-19 stood at €994.8
million, down 2.7%.

Revenues of the five Operating Verticals (excluding ‘Other Revenues’)
were down by 3.0% like-for-like, excluding a negative perimeter effect
of c.0.5 points (net impact of the acquisition of Noorsat and of the
disposal of EUTELSAT 25B) and a positive currency effect of c.1point.

Nine months to 31 March 2019

FINANCIAL OUTLOOK

At the Nine Month stage, revenues of the Operating Verticals of -3.0%
like-for-like are tracking behind our Full Year objective of ‘Broadly
Stable’ reflecting temporary operational issues delaying the ramp-up of
Konnect Africa, softer conditions in Fixed Data and Professional Video
and the late materialization of some contracts in the Video pipeline. We
now expect the outturn for FY 2018-19 to be in the same range of circa
-3%¹².

We continue to target a return to slight topline growth in FY 2019-20¹³,
which will benefit from the materialization of the delayed business
mentioned above, an improvement in the performance of European
Broadband, the initial contribution from the EGNOS payload on EUTELSAT 5
West B and the availability of new capacity on EUTELSAT 7C and EUTELSAT
QUANTUM.

All other financial objectives for the current and following years are
also confirmed:

• The EBITDA margin (at constant currency) is expected above 78%
  from FY 2018-19.
• The estimated Cash Capex¹³ spend is expected at an
  average of €400 million per annum for the period July 2017 to June
  2020.
• Discretionary Free Cash Flow is expected to
  grow at a mid-single digit CAGR in the period July 2017¹⁴
  to June 2020 (at constant currency and excluding the impact of the
  disposal of the interest in EUTELSAT 25B).
• The Group is committed to maintaining a sound financial structure to
  support its investment grade credit rating with a net debt / EBITDA
  ratio below 3.0x.
• It also reiterates its commitment to serving a stable to
  progressive dividend.

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

FLEET DEVELOPMENTS

Nominal deployment programme

Since the last quarterly update in February 2019, the launch of EUTELSAT
5 WEST B is now expected in Q3 2019, versus Q2 2019 previously, with no
impact on the revenue profile.

Changes in the fleet

• EUTELSAT 12 WEST B now operates in inclined orbit.
• EUTELSAT 70C is being relocated.

*****

Third Quarter 2018-19 revenues conference call

A conference call will be held on Tuesday, 14 May 2019 at 18.30
CET / 17.30 GMT / 12:30 EST

To connect to the call, please use the following numbers:

• France: +33 (0) 1 76 77 22 57
• UK: +44 (0) 330 336 9411
• United States: +1 929 477 0324

Access code: 8262728#

Replay will be available from 14 May 2019 to 21 May 2019 on the
following numbers:

• France: +33 (0) 1 70 48 00 94
• UK: + 44 (0) 207 660 0134
• United States: + 1 719 457 0820

Access code: 8262728#

APPENDICES: QUARTERLY REVENUES BY APPLICATION

Reported revenues

The table below shows quarterly reported revenues. Note: IFRS 15 was
adopted from July 1^st 2018.

Proforma revenues

The table below shows quarterly proforma revenues for FY 2017-18. For
comparability purposes with FY 2018-19 figures, they are restated from
the following items:

• The contribution of EUTELSAT 25B as of August 2017. As a reminder,
  Eutelsat sold its interest in the Eutelsat 25B satellite in August
  2018.
• The impact of IFRS 15.

Financial calendar

The financial calendar below is provided for information purposes only.
It is subject to change and will be regularly updated.

• 31 July 2019: Full Year 2018-19 results

About Eutelsat Communications
Founded in 1977, Eutelsat
Communications is one of the world’s leading satellite operators. With a
global fleet of satellites and associated ground infrastructure,
Eutelsat enables clients across Video, Data, Government, Fixed and
Mobile Broadband markets to communicate effectively to their customers,
irrespective of their location. Over 7,000 television channels operated
by leading media groups are broadcast by Eutelsat to one billion viewers
equipped for DTH reception or connected to terrestrial networks.
Headquartered in Paris, with offices and teleports around the globe,
Eutelsat assembles 1,000 men and women from 46 countries who are
dedicated to delivering the highest quality of service. Eutelsat
Communications is listed on the Euronext Paris Stock Exchange (ticker:
ETL).

For more about Eutelsat please visit: www.eutelsat.com

___________________________________________________________________________________________________

Disclaimer

The forward-looking statements included herein are for illustrative
purposes only and are based on management’s current views and
assumptions. Such forward-looking statements involve known and unknown
risks. For illustrative purposes only, such risks include but are not
limited to: postponement of any ground or in-orbit investments and
launches including but not limited to delays of future launches of
satellites; impact of financial crisis on customers and suppliers;
trends in Fixed Satellite Services markets; development of Digital
Terrestrial Television and High Definition television; development of
satellite broadband services; Eutelsat Communications’ ability to
develop and market Value-Added Services and meet market demand; the
effects of competing technologies developed and expected intense
competition generally in its main markets; profitability of its
expansion strategy; partial or total loss of a satellite at launch or
in-orbit; supply conditions of satellites and launch systems; satellite
or third-party launch failures affecting launch schedules of future
satellites; litigation; ability to establish and maintain strategic
relationships in its major businesses; and the effect of future
acquisitions and investments.

Eutelsat Communications expressly disclaims any obligation or
undertaking to update or revise any projections, forecasts or estimates
contained in this presentation to reflect any change in events,
conditions, assumptions or circumstances on which any such statements
are based, unless so required by applicable law.

———-

¹ Pro-forma revenues reflecting the disposal of EUTELSAT 25B.
Please refer to the appendix for more detail.
² Q3
2018-19 reported revenues versus Q3 2017-18 revenues restated from IFRS
15.
³ At constant currency, perimeter and accounting
standards. The variation is calculated as follows: i) Q3 2018-19 USD
revenues are converted at Q3 2017-18 rates; ii) Q3 2017-18 revenues are
restated from the disposal of Eutelsat’s interest in EUTELSAT 25B and
from the impact of IFRS 15 standards.
⁴ Q3 2018-19
revenue variation versus Q2 2018-19 at constant currency and perimeter.
Q3 2018-19 USD revenues are converted at Q2 2018-19 rates.
⁵ Other
revenues include mainly compensation paid on the settlement of
business-related litigations, the impact of EUR/USD currency hedging,
the provision of various services or consulting/engineering fees and
termination fees.
⁶ The share of each application as a
percentage of total revenues is calculated excluding “Other Revenues”.
Unless otherwise stated, all growth indicators are at constant perimeter
and currency.
⁷ Number of transponders on satellites in
stable orbit, back-up capacity excluded.
⁸ Number of
transponders utilised on satellites in stable orbit.
⁹
The backlog represents future revenues from capacity or service
agreements and can include contracts for satellites under procurement.
¹⁰
Proforma revenues reflecting the disposal of EUTELSAT 25B. Please
refer to the appendix for more detail.
¹¹ At constant
currency, perimeter and accounting standards. The variation is
calculated as follows: i) 9m 2018-19 USD revenues are converted at 9m
2017-18 rates; ii) 9m 2017-18 revenues are restated from the disposal of
Eutelsat’s interest in EUTELSAT 25B and from the impact of IFRS 15
standards; iii) 9m 2018-19 revenues are restated from the net
contribution of Noorsat.
¹² Variation for the Operating
Verticals (excluding Other Revenues) at constant currency, perimeter and
accounting standards.
¹³ Including capital expenditure
and payments under existing export credit facilities and long-term lease
agreements on third party capacity.
¹⁴ Net cash-flow
from operating activities – Cash Capex – Interest and Other fees paid
net of interest received.

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