SES SA (SGBAF) Q3 2026 Earnings Call Highlights: Backlog Surges to EUR10 Billion as Leverage ...

Negative Points

• Like-for-like revenue for first nine months declined 2% year on year, with media down 6.8% and fixed data down 15.2%.

• Fixed data continues to face significant headwinds and competitive environment, despite some sequential improvement in Q3.

• Aviation contract restructurings in Q1 and Q3 were higher than normal, impacting adjusted EBITDA, though non-cash.

• IRIS revenues are expected to be at lower margins during development and construction phase.

• Maritime performance was in line with expectations but faced anticipated competitive headwinds and mPOWER supply constraints.

• Media like-for-like decline is expected to continue in mid-single to high-single digits, reflecting secular decline.

• Government and defense growth excluding IRIS was only 2.7% year on year on a like-for-like basis, though improving.

• C-band transition requires significant CapEx (EUR100-150 million in 2026) and awaits reimbursement, with auction not until 2027.

• Net leverage remains elevated at 3.7x, above target of 3x or below, though improving.

• Capital Markets Day rescheduled to March 2027, delaying mid-term targets and long-term ambitions update.

Q & A Highlights

Q: How should investors think about the aviation contract restructurings (EUR54 million in Q3, EUR81 million in Q1) and whether they will recur? A: CFO Lisa Pataki said contract restructurings are a normal course of business, but the aviation restructurings in Q1 and Q3 were higher than usual and should not be expected at that magnitude in the near term. She also noted these are non-cash revenues, which is important for modeling purposes.

Q: Can you provide more color on potentially bringing forward a portion of C-band proceeds ahead of the Capital Markets Day? A: CEO Adel Al-Saleh said it is premature to give details, but SES is progressing key milestones: submitting the transition plan to the FCC, appointing a clearinghouse by year-end, and awaiting the auction. He said SES sees market interest and is exploring options, but any acceleration must be financially value-accretive and support deleveraging and shareholder returns.

Q: What drove the strong media performance in Q3, and how should we model Q4 and the longer-term decline rate? A: CEO Adel Al-Saleh said Q3 media performance was as planned, driven by large contract renewals and certain accounting treatments. He expects media to stabilize in the mid-single to high-single-digit decline range for the year, versus prior double-digit declines, with the renewals providing good forward visibility.

Q: Net leverage fell materially to 3.7 times in Q3. Was this mainly due to the EUR700 million of advances, and where should leverage finish the year? A: CFO Lisa Pataki said proactive working capital management and upfront funding, including about EUR700 million of advances and milestone payments in government and defense, drove the reduction from 4.4 times to 3.7 times. She expects to end 2026 in line with the September level. CEO Adel Al-Saleh added that the improvement also reflects disciplined contract terms, inventory management, and payment timing, not just prepayments.

Q: How will IRIS revenues be recognized, and will they be reported separately given their low-margin nature? A: CFO Lisa Pataki said IRIS revenue will be recognized on a percentage-of-completion basis, similar to aerospace and defense long-term contracts, at low margin. This includes both the European Commission-funded portion and SES's own investment, which is treated as a payment in kind because SES has 90% access rights. CEO Adel Al-Saleh said SES is still deciding whether to report IRIS separately and will provide more detail at the Capital Markets Day.

Q: When does meoSphere CapEx start stacking on top of the EUR600 million core CapEx base? A: CEO Adel Al-Saleh said meoSphere CapEx is already included in current numbers and has been guided together with IRIS because the two systems overlap significantly, including similar payloads. SES will provide 2027 and multi-year CapEx guidance at the Capital Markets Day. He emphasized that the new model uses customer co-investment and prepayments to reduce SES's upfront capital burden.

Q: Where does SES stand on Intelsat synergies, and what savings could come from the SES factory? A: CEO Adel Al-Saleh pointed to an 11% reduction in labor costs and a significant decline in controllable costs year to date as evidence that OpEx synergies are coming through. He said SES is well on track on promised integration savings and has already reached CapEx levels previously targeted for two years out. On the factory, he said verticalization is delivering high double-digit savings versus the old model, though it is still early.

Q: What are aviation customers saying about choosing SES's electronically steered antennas versus Starlink or Eutelsat's LEO offering? A: CEO Adel Al-Saleh said SES has signed 250 tails year to date and customers value its electronically steered antennas, which support both OneWeb and GEO capability. He said the service quality is strong and customers increasingly want multiple options rather than a single provider, which fits SES's multi-orbit capabilities.

Q: How should we think about the return on capital for meoSphere, and does IRIS's 10% IRR imply a lower return? A: CFO Lisa Pataki said IRIS is structured to maintain a 10% IRR, including contractual protections with ESA and the European Commission. CEO Adel Al-Saleh said SES is focused on improving return on capital employed across all investments, including IRIS, PTS-G, NEXUS, and meoSphere, and that the new model of customer co-investment and prepayments reduces balance sheet pressure and supports better returns.

Q: What are SES's plans for its Eutelsat relationship and the European S-band spectrum? A: CEO Adel Al-Saleh said SES likes Eutelsat's direct-to-device capability and has invested in the company. The relationship goes beyond investment, including using SES's MEO network as backhaul and leveraging SES ground infrastructure. He confirmed SES is interested in the European S-band spectrum and will compete for it, likely partnering with Eutelsat and potentially others, though he expects the process to be highly competitive.

Q: The backlog rose 56% quarter on quarter to EUR10 billion. How much is IRIS, and is there enough demand for all planned constellations, including SES? A: CFO Lisa Pataki said the backlog increase was driven by about EUR800 million of government orders and EUR900 million of media orders, plus IRIS. Excluding IRIS, book-to-bill is slightly above 90% year to date, and the backlog is mostly secured and contractual. CEO Adel Al-Saleh rejected the "winner takes all" narrative, saying demand is expanding, customers want options, and governments require multi-orbit resilience. He said SES focuses on differentiated segments such as multi-orbit, managed services, and government and defense rather than competing head-on with Starlink.

Q: Is the backlog essentially guaranteed revenue? A: CFO Lisa Pataki said the backlog is mostly secured, with some funded and unfunded portions, and excludes options. CEO Adel Al-Saleh added that it is contractually secure and excludes TCVs beyond contractual terms, though some contracts, such as IRIS

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