Release Date: May 12, 2020
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Amadeus IT Group SA (XMAD:AMS, Financial) acted decisively to protect its liquidity position by implementing cost-saving programs and securing additional capital.
- The company enhanced its competitive position in the Distribution segment by 0.3% in the first quarter.
- Despite the pandemic, Amadeus IT Group SA (XMAD:AMS) continued to sign new distribution agreements and grow its airline customer base.
- The Hospitality segment showed resilience with several revenue lines still growing double digits in the quarter.
- Amadeus IT Group SA (XMAD:AMS) generated free cash flow of EUR 290 million in the first quarter, a 3% increase compared to the previous year.
Negative Points
- Travel agency bookings declined by 44.6% and passengers boarded (PBs) by 12% in the first quarter due to the COVID-19 pandemic.
- Revenue, EBITDA, and adjusted profit contracted by 27%, 41%, and 57%, respectively, in the first quarter.
- The Distribution segment saw a 47% decline in travel agency bookings, leading to a 45% reduction in Distribution revenue.
- The company had to cancel its complementary dividend payment and share buyback program.
- Amadeus IT Group SA (XMAD:AMS) increased its bad debt provision due to the COVID-19 crisis, impacting its financial performance.
Q & A Highlights
Q: What are you seeing in the Asian markets where lockdowns have begun to ease, and how are customers behaving in terms of bookings and future product discussions?
A: Luis Maroto Camino, President, CEO & Executive Director: It's difficult to extract conclusions, but there are some signs of positiveness. Domestic traffic in some Asian markets like Korea and China is more available. Airlines are keen on discussing business recovery and future opportunities. However, volumes are still very negative, and it's too early to say the situation is improving. We expect domestic traffic to recover first, followed by regional and global traffic.
Q: What major technology projects are you continuing to fund to emerge stronger post-crisis?
A: Luis Maroto Camino, President, CEO & Executive Director: We are protecting investments in customer commitments, core technology, and strategic areas like merchandising and NDC. We continue to develop functionalities in the hotel sector and evolve our core technology towards the cloud. Some projects may be delayed, but our main priorities are protected.
Q: Can you comment on the financial viability of your major airline customers in EMEA?
A: Ana de Pro Gonzalo, CFO: We've seen fewer airline cessations in 2020 compared to 2019. Major groups have managed through equity issuance, refinancing, state aids, and other mechanisms. While it's a difficult time, most large groups have secured liquidity to continue operations. We are in discussions with governments and countries to ensure long-term viability.
Q: Do you expect the current crisis to accelerate the shift to OTA bookings versus travel management companies?
A: Luis Maroto Camino, President, CEO & Executive Director: Leisure travel, which OTAs primarily handle, is expected to recover before business travel. However, both segments will eventually recover. The TMCs serve different segments and will continue to play a crucial role in business travel.
Q: How are you thinking about a potential recovery in 2021 in terms of volumes?
A: Luis Maroto Camino, President, CEO & Executive Director: It's extremely difficult to predict. We are developing different scenarios and preparing for the worst-case scenario. We expect domestic traffic to recover first, followed by regional and global volumes. We are using sources like IATA for projections but remain flexible to adapt to evolving circumstances.
Q: Are you considering offering a non-transactional model in the Airline IT business?
A: Luis Maroto Camino, President, CEO & Executive Director: We are considering all business models. While our current transaction-based model has been successful, we may explore alternative models for some products. However, we are not planning to change the business model immediately.
Q: Can you give us an idea of Hotel IT growth in the quarter and the impact of non-transactional revenues?
A: Luis Maroto Camino, President, CEO & Executive Director: Hotel IT growth was strong at the beginning of the year but was impacted later by COVID-19. Part of our business model with hotels is non-transactional, providing some resilience. However, we still need to negotiate with customers facing financial difficulties. Overall, the performance was strong, and we continue to sign new customers.
Q: How should we think about EBITDA margins given the current crisis?
A: Ana de Pro Gonzalo, CFO: EBITDA margins will depend on the recovery's shape and timing. We expect negative operational leverage in the short term but will adapt our cost structure to maintain operational leverage in the mid to long term. It's too early to predict exact margin evolution.
Q: Are you considering using your relatively better capitalized position to benefit your customers?
A: Ana de Pro Gonzalo, CFO: We are having individual discussions with customers about potential agreements, including delaying collections. Our objective is to support our customers while ensuring our financial stability.
Q: How do you see the TMC market evolving post-crisis?
A: Luis Maroto Camino, President, CEO & Executive Director: The TMC market will continue to evolve with increased automation and consolidation. We invest in solutions for corporations and TMCs to provide better tools for managing corporate travel. Business travel will recover, and TMCs will remain crucial in serving their customers.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
