Release Date: February 26, 2021
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) saw a gradual improvement in air travel agency bookings each month in Q4 2020, supported by both gross booking evolution and a continued normalization of the cancellation ratio.
- The company's Hospitality CRS transactions outperformed air volumes, indicating a strong performance in relation to air travel market conditions.
- Amadeus IT Group SA (XMAD:AMS) signed 11 new contracts or renewals of distribution agreements with airlines in Q4 2020, totaling 67 for the full year.
- The company announced a strategic partnership with Microsoft to boost technological capabilities and innovate together, aiming to operate in the public cloud within the next 3 to 5 years.
- Amadeus IT Group SA (XMAD:AMS) achieved a fixed cost reduction of EUR 506.1 million for the full year 2020, exceeding initial expectations.
Negative Points
- Global air traffic declined by 70.2% in Q4 2020 compared to the prior year, with Amadeus air travel agency bookings decreasing by 79.4% relative to 2019.
- Distribution revenue declined by 77.9% in Q4 2020 versus the prior year, significantly impacting overall financial performance.
- EBITDA in Q4 2020 amounted to EUR 31.6 million, a 93% decrease relative to the prior year, or a decline of 85% excluding cancellations and bad debt effects linked to COVID-19.
- Free cash flow in Q4 2020 resulted in a EUR 214 million cash outflow, with an adjusted profit loss of EUR 88 million.
- Net financial debt closed the year at EUR 3.074 billion, reflecting the financial strain caused by the pandemic.
Q & A Highlights
Highlights of Amadeus IT Group SA (XMAD:AMS) Earnings Call
Q: Can you quantify the savings from the Microsoft partnership and confirm if they will be reinvested into R&D?
A: Luis Maroto Camino, President, CEO & Executive Director: The savings from the Microsoft partnership will be progressive as we migrate to the public cloud. These savings are considered in our projections and cost savings for 2021. The intention is to reinvest these savings into core businesses.
Q: How are the unitary economics in the IT Solutions business trending, particularly between Altéa and Navitaire volumes?
A: Till Streichert, CFO: Navitaire has been trending better than Altéa in recent weeks and months, reflecting the market's focus on domestic and local bookings.
Q: How do you get comfortable with moving entirely to a public cloud with Microsoft, and what are the potential benefits?
A: Luis Maroto Camino, President, CEO & Executive Director: The decision to move to the public cloud with Microsoft is based on the evolution of public cloud capabilities. The partnership is not exclusive, and we can work with other cloud providers. Benefits include leveraging Microsoft's technology in AI, machine learning, and other areas to optimize our solutions and innovate together.
Q: How do you broadly think about EBITDA margin prospects for 2021, considering IATA's air traffic forecast?
A: Luis Maroto Camino, President, CEO & Executive Director: Providing specific guidance is difficult due to many moving factors, including domestic vs. international traffic and regional effects. However, Hospitality has been more resilient and should perform better than air traffic.
Q: Will there be a significant shift from CapEx to OpEx due to increased cooperation with Microsoft?
A: Till Streichert, CFO: There will be a shift from CapEx to OpEx, but it is not expected to be significant. Amadeus has already been on a journey to the cloud, and a portion of our traffic is outside our core data center.
Q: How do you see the market share dynamics between OTAs and smaller travel agents as the market recovers?
A: Luis Maroto Camino, President, CEO & Executive Director: OTAs have gained market share due to stronger leisure travel. Medium-term, small travel agencies should recover, although some may disappear or consolidate. The balance between retail, business TMCs, and OTAs is expected to stabilize.
Q: What are your thoughts on Emirates' surcharge strategy, similar to Lufthansa's?
A: Luis Maroto Camino, President, CEO & Executive Director: Airlines have different strategies. Amadeus aims to integrate content through our platform, offering efficient solutions for travel agencies. The commercial strategies of airlines will vary, but our platform can handle diverse content effectively.
Q: Are you forecasting a progressive recovery to 2019 levels by 2024?
A: Luis Maroto Camino, President, CEO & Executive Director: Based on various sources, including IATA, we expect a recovery to 2019 levels by 2024. However, the exact speed of recovery is difficult to predict.
Q: Can you explain the rationale for extending the life of certain assets, reducing the amortization charge?
A: Till Streichert, CFO: The extension of asset lives was justified by the renewal of contracts with customers, indicating that the technology will be in use for longer than initially expected.
Q: What is the pipeline for new deals or new scope with Airline IT customers?
A: Luis Maroto Camino, President, CEO & Executive Director: We have ongoing discussions with potential airline customers. While specific names cannot be disclosed, we hope some opportunities will materialize in 2021.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
