Release Date: February 28, 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) delivered strong financial results in 2019, with revenue, EBITDA, and adjusted profit growth of 12.8%, 10%, and 13.4%, respectively.
- The company achieved higher-than-expected market share gains in distribution and pricing expansion, contributing to its robust performance.
- Amadeus IT Group SA (XMAD:AMS) saw significant growth in its IT Solutions segment, with a 26.2% increase in revenue, driven by high single-digit growth in Airline IT Solutions and double-digit growth in new businesses.
- The acquisition of TravelClick positively impacted the company's financial performance, further boosting revenue and EBITDA growth.
- Amadeus IT Group SA (XMAD:AMS) maintained a sound financial structure with a leverage ratio of 1.23x last 12 months EBITDA and generated free cash flow of EUR 1,044 million, an 8.1% pretax increase relative to 2018.
Negative Points
- The company faced challenges due to the slowdown in the Indian aviation sector and the Indian GDS industry, which negatively impacted growth rates.
- Global trade activity was weaker, and political and geopolitical tensions, along with the 737 MAX grounding, affected the overall industry performance.
- Amadeus IT Group SA (XMAD:AMS) experienced a higher-than-usual number of airlines ceasing operations, which impacted its passenger boarded (PB) growth.
- The company saw margin dilution in its Distribution segment, mainly due to competitive pressure and the strong growth of the lower-margin payment distribution business.
- The coronavirus outbreak in early 2020 introduced significant uncertainty, making it difficult to predict the impact on global GDP and traffic, potentially affecting the company's performance.
Q & A Highlights
Q: Can you share on the Airline IT side, given that you have a lot of exposure with Navitaire to low-cost carriers, especially in Asia, are you seeing a bigger decline in the Navitaire business than the Altéa carriers?
A: It is more regional than taking Navitaire versus Altéa. Navitaire has exposure in Asia, but we also have Altéa exposure in Asia. The impact is bigger in Asia, regardless of whether it's Navitaire or Altéa. In North America, the impact has been mild so far. The mix effect weighs more than the parts of Navitaire versus Altéa.
Q: On the GDS business, are you seeing a bigger impact on domestic, regional, or international bookings?
A: It's more regional. We had a higher cancellation rate, particularly in Asia, including Japan and Korea. The impact is more on international bookings than domestic traffic. The figures vary, but the trend is that Asia is more impacted.
Q: Sabre mentioned their impact to revenues was one number and the impact to EBITDA was twice that. Do you think something similar would be the case for you?
A: We have variable costs related to incentives and distribution fees, which will reduce with volumes. Fixed costs tend to be more fixed, but we have some flexibility. We will be cautious with our spending and protect investments that bring mid- to long-term growth. We will monitor the situation and adjust accordingly.
Q: In the Distribution business, how do you see the revamp of competitors' technology playing out in 2020 in terms of market share?
A: Market share dynamics are ongoing. We invest in our technology and try to provide good service and solutions. The current situation makes discussions with customers different, but we continue to focus on our technology and market share gains.
Q: Can you provide more color on the 10% to 15% decline in bookings across regions?
A: The decline is more pronounced in the Asia Pacific region. The figures vary depending on cancellations and specific days. We are observing a trend of 10% to 15% decline in GDS industry growth and around 7% decline in organic traffic.
Q: Are you expecting much lower than normal GDS disintermediation in FY '20?
A: We have not made specific assumptions on disintermediation. We have taken the average disintermediation and traffic trends to model our projections. The situation is dynamic, and we will monitor and adjust as needed.
Q: Can you use this period to make more progress with airlines and hotels in Asia to help their recovery?
A: We have been partnering with airlines and hotels for many years. We aim to help them enhance their business strategies. We will continue to support them and look for opportunities to improve their operations.
Q: Are you seeing any financial difficulties with travel agents, particularly in Asia?
A: We continuously review our deals with customers and manage financial risks. Some travel agencies may face difficulties, but we support them and monitor the situation closely.
Q: On the Hospitality business, would you expect it to be less impacted by coronavirus compared to the distribution side?
A: The Hospitality business is more U.S. domestic-focused and has shown less impact so far. The business model is not entirely transaction-based, providing some resilience. We will continue to monitor the situation.
Q: Can you confirm that you have enough flexibility to maintain a leverage ratio of 1 to 1.5x net debt to EBITDA by year-end 2020?
A: We aim to maintain our leverage ratio within that range. We will monitor the situation and adjust our cost measures and investments accordingly to achieve this goal.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
