Release Date: July 29, 2022
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 an acceleration in travel industry recovery, with significant improvements in both international and domestic traffic.
- Revenue, EBITDA, and adjusted profit reached 83%, 84%, and 75% of pre-COVID levels, respectively, indicating strong quarter-on-quarter improvement.
- The company generated a free cash flow of EUR 182 million in Q2, with leverage decreasing to 2.2x last 12-month EBITDA, approaching pre-pandemic levels.
- Amadeus IT Group SA (XMAD:AMS) signed 8 new or renewed Air distribution agreements in Q2, totaling 29 in the first half of the year, expanding its NDC reach.
- Hospitality & Other Solutions revenue was up 94% of Q2 2019 levels, showing strong recovery and new customer implementations across its portfolio.
Negative Points
- Despite improvements, revenue, EBITDA, and adjusted profit are still below pre-COVID levels, indicating a full recovery has not yet been achieved.
- The company experienced a slowdown in bookings in July compared to June, driven by an increase in cancellations due to airport disruptions and supply-side frictions.
- Fixed costs in Q2 2022 were 15.5% higher compared to the same quarter last year, driven by increased R&D investment and non-R&D spend.
- The Air Distribution contribution margin, while back to 2019 levels, may face challenges due to the evolving booking mix and associated costs.
- The company is still dealing with the impact of EU travel disruptions, flight cancellations, and associated higher cancellation provisions, which could affect financial performance.
Q & A Highlights
Q&A Highlights from Amadeus IT Group SA (XMAD:AMS) Earnings Call
Q: Can you provide a framework for shareholder remuneration given the current leverage ratio?
A: (Luis Maroto Camino, President, CEO & Executive Director) We aim to return to our pre-pandemic leverage target of 1 to 1.5x debt-to-EBITDA. We will balance shareholder remuneration with M&A opportunities and business investments. The final decision will depend on the macroeconomic environment and business evolution.
Q: What are the main factors affecting working capital in the first half of the year?
A: (Till Streichert, CFO) The primary factors are personnel-related payments and the payment of last year's cost-saving implementation costs. We expect a positive working capital effect in the third and fourth quarters, aligning with our usual seasonality.
Q: Can you elaborate on the fixed cost growth and its impact on future quarters?
A: (Till Streichert, CFO) Fixed costs grew by 12.1% in the first half, driven by increased R&D investment. We expect a slight step-up in Q3 costs, but we remain within our 10% to 14% growth guidance. Inflationary pressures are also considered in this range.
Q: How are travel disruptions and cancellations affecting your financial performance?
A: (Luis Maroto Camino, President, CEO & Executive Director) The disruptions have primarily impacted Europe and the U.S. However, the overall demand remains strong, with high load factors. The impact on financial performance is minimal, and we expect cancellations to normalize soon.
Q: What is driving the difference in recovery speed between bookings and passengers boarded in Europe?
A: (Luis Maroto Camino, President, CEO & Executive Director) The faster recovery in passengers boarded is due to the growth of low-cost carriers and leisure travel. Business travel is also rebounding, nearing 2019 levels in recent months.
Q: How is the headcount evolving to meet demand and implementation projects?
A: (Till Streichert, CFO) We are ramping up headcount, particularly in R&D, to support key projects. We are well-positioned to attract talent and meet the demands of our implementation pipeline.
Q: Can you provide details on the tangible CapEx reduction and its future outlook?
A: (Till Streichert, CFO) The reduction in tangible CapEx is due to decreased hardware investment as we migrate to the cloud with Microsoft Azure. This trend will continue, reflecting lower data center investments.
Q: What are the regional booking trends in July?
A: (Luis Maroto Camino, President, CEO & Executive Director) We don't provide monthly regional details, but Europe has been most impacted by disruptions. Asia-Pacific shows strong recovery, while the U.S. also faces some disruptions.
Q: When will the impact of Expedia bookings be fully reflected?
A: (Luis Maroto Camino, President, CEO & Executive Director) Expedia bookings are already included in our figures. The migration started in Q3 last year, and we expect it to be fully reflected by the end of Q3 this year.
Q: How do you calculate the cancellation provision, and what is the current bad debt provision?
A: (Till Streichert, CFO) The cancellation provision is based on inventory size and historical cancellation ratios. The bad debt provision has slightly increased due to specific risks like Russia, but overall, it remains stable.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
